Have you ever wondered if being attractive might help entrepreneurs raise venture capital funding? A new study led by Mark D. Baalman of the Vrije Universiteit Amsterdam sheds light on this interesting question. The researchers found that the physical attractiveness of male entrepreneurs and venture capitalists significantly influences their financial decisions in the high-stakes world of venture capital investing. This study reveals a seemingly subtle but powerful influence in determining the flow of millions of euros in the European information technology (IT) industry.
This research frontiers of psychology.
Bahlman embarked on this research journey to investigate the evolutionary basis of risk-taking behavior, particularly in the context of innovation and venture capital funding. “Recently, I have become interested in evolutionary psychology in general, and how our embodied dispositions influence our behavior, perspectives, and risk-taking in particular. I am interested in the context of innovation decision-making. I am particularly interested in the evolutionary nature of risk-taking behavior in the field,” explained Bahlman, assistant professor of management and organizations.
Previous research has documented the influence of opposite-sex stimulation on behaviors such as financial risk-taking and decision-making. However, the area of same-sex stimulation, particularly among men, has been less studied, especially in real-world settings.
Bahlman aimed to fill this gap by focusing on the venture capital sector. This is an area where ventures with high growth potential attract significant financial risk and where decisions have traditionally been based on rational analysis. However, evidence suggests that these decisions are also susceptible to the “attractiveness halo effect,” in which good looks are unconsciously associated with positive traits such as intelligence or trustworthiness. There are often
To conduct this study, Bahlmann compiled a dataset of 341 male-led European IT ventures, leveraging information from AngelList and Crunchbase, supplemented with LinkedIn profiles, and We have provided a comprehensive understanding of our home team and related investors. With a particular focus on ventures by male entrepreneur-investor duos, we provide clear information on the composition of entrepreneurial teams and the funding process across these platforms, ensuring the reliability and relevance of the data. We are ensuring.
Physical attractiveness was assessed by having 10 graduate students rate the LinkedIn profile photos of entrepreneurs and investors. In this study, we measured venture capitalists’ financial risk-taking by examining the amount invested in a startup’s first and second funding rounds. To ensure the accuracy of our findings, we include various control variables such as venture age, team size, and market direction.
Bahlman found evidence that the physical attractiveness of both entrepreneurs and venture capitalists plays an important role in initial funding rounds.
Venture capitalists with average or below-average attractiveness were more likely to invest heavily in startups led by attractive entrepreneurs in their first funding round. This suggests that perceptions of physical attractiveness may sway investment decisions, as venture capitalists may seek to partner with entrepreneurs who exhibit the desirable characteristics symbolized by their attractiveness. Masu.
However, this effect did not apply to venture capitalists, who were considered to be above average in attractiveness, and showed more consistent risk-taking behavior regardless of the entrepreneur’s physical appearance.
The findings suggest that “entrepreneurs’ physical attractiveness acts as a subconscious cue for venture capitalists’ investment decisions, but how this occurs depends on the venture capitalist’s own physical attractiveness.” Bahlmann told SciPost. “This means that the evolutionary, upward social comparison effects that originally served to stimulate male mating strategies also generalize in the context of economic risk-taking.”
As the funding process progressed into the second round, Bahlman saw a shift in how an entrepreneur’s physical attractiveness influenced investment decisions. For venture capitalists with below-average attractiveness, entrepreneurial attractiveness was negatively related to second-round risk taking.
This shift may be indicative of a “beauty penalty” effect, where initial positive biases based on attractiveness can be reversed if entrepreneurs fail to meet the high expectations set by their appearance. Alternatively, it suggests a complex interplay in which the initial attractiveness-driven bias fades and the risk assessment landscape changes as more substantive venture performance data become available.
“We were somewhat surprised by the idea that the positive effect of entrepreneurs’ physical attractiveness on venture capitalists’ risk-taking turned negative in the second round of risk-taking, but this is not true for venture capitalists with below-average attractiveness.” It’s limited to the list,” Bahlmann said. “This effect has not been established for venture capitalists with average or above-average attractiveness.”
Although Bahlmann’s study provides important insights into the role of physical attractiveness in venture capital decision-making, it also has some limitations. One of the limitations of this study is that it relies on archival and observational data, and it does not include information about individuals’ psychological tendencies that may influence financial risk-taking. did not.
“This study is based on correlational data,” Bahlmann said. “This means that we need to be cautious in making causal claims, even if some statistical techniques are used to create more robust causal relationships.”
Future research should investigate the effects of same-sex attraction in other industries and contexts, investigate the long-term effects of physical attractiveness on venture success, and explore how other personal attributes interact with physical appearance. may investigate how people’s lives influence their professional and financial decisions. There is also a growing need to understand how these findings apply to women entrepreneurs and venture capitalists, as the proportion of women in the technology industry and venture capital continues to increase.
“Ultimately, we want to better understand the evolutionary mechanisms of innovation decision-making,” Bahrman said. “This ranges from venture capitalists’ investment decisions in startups to CEOs and TMTs’ decisions about which new technological trajectory to follow.”
The study, “Physical Attractiveness, Same-Sex Stimulation, and Financial Risk-Taking of Male Venture Capitalists,” was published on January 11, 2024.
