Ingroup Bias

The Ingroup bias is a cognitive bias defined by Wikipedia as the tendency for people to give preferential treatment to others they perceive to be members of their own groups.

Investors give preference to those in their network over those outside their network.

This can be a challenge as startup investing is often based on network referrals and personal recommendations.

Investors prioritize those in their network over those outside their network.

To overcome ingroup bias, build relationships with other groups and formally syndicate deal-flow. 

Develop formal criteria for deal-flow and apply them rigorously to deals coming from your own network.

Poor investments often come from personal recommendations that are well-known but don’t meet the investors criteria.

For each deal both within your network and from outside, apply your screening criteria.

Every group has some number of quality deals so consider deals from other groups in your deal-flow process.

 

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

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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.