Availability Heuristic

The availability heuristic is a cognitive bias defined by Wikipedia as a mental shortcut that relies on immediate examples that come to a given person’s mind when evaluating a specific topic, concept, method, or decision. 

The availability heuristic operates on the notion that if something can be recalled, it must be important, or at least more important than alternative solutions which are not as readily recalled. 

Subsequently, under the availability heuristic, people tend to heavily weigh their judgments toward more recent information, making new opinions biased toward the latest news.

In the startup world, investors bring their recent memories about a startup into the diligence process for investing.

That which they recall is given more weight than that which must be researched.

This puts the investor at a disadvantage in working with incomplete information.

Investors should take good notes on the startup during pitch sessions and use those notes in the diligence phase. 

This will reduce the prominence of easily remembered items and bring important ones to the surface.

 

Thank you for joining us for the Startup Funding Espresso where we help startups and investors connect for funding.

Let’s go startup something today.

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Thank you for joining your host Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing.

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Hall T Martin is the director of Investor Connect, which is a 501(c)(3) nonprofit dedicated to the education of investors for early-stage funding. All opinions expressed by Hall and podcast guests are solely their own opinions and do not reflect the opinion of Investor Connect. This podcast is for informational purposes only and should not be relied upon for the basis of investment decisions.