February 17, 2023 by investor
Law of the Instrument
The Law of the instrument is a cognitive bias defined by Wikipedia as the over-reliance on a familiar tool or method, ignoring or under-valuing alternative approaches.
“If all you have is a hammer, everything looks like a nail.”
Investors use the deal flow and screening process they are most familiar with. These tools can favor some deals over others.
Deal flow channels provide a certain type of deal flow which may or may not be the best available.
Explore other deal flow channels to find better deals.
Also, the investor’s screening process focuses on specific aspects of the startup such as team, traction, or market size.
Consider other screening criteria to find better deals.
From these efforts consider updating your deal flow and screening process overall.
As startup markets change and evolve, new business models and market conditions prevail.
New models and markets often need new deal flow and screening processes.
Explore how other investors find and screen startups and compare them to your own.
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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.
