Mere Exposure Effect

Mere exposure effect is a cognitive bias defined by Wikipedia as the tendency to express undue liking for things merely because of familiarity with them.

Angel investors are much more likely to invest in deals in which they have more exposure to it. 

This can lead to investments in substandard startups.

To avoid the mere exposure effect, the investor should first recognize it as a bias and keep it in mind when reviewing startups for funding.

The investor should ask the question, “why invest in this startup?” and check for the answer.

If it’s because the startup is familiar but the team, product, or market is not outstanding, then it should be a pass.

While familiarity may give the investor more information about the startup it should not stand in for proper diligence.

The investor should have a set of criteria by which to judge startups and should use that criteria in testing them for funding.

 

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.