More from the Author

• Case | HBS Case Collection | October 2018

  Arlan Hamilton and Backstage Capital

  Laura Huang and Sarah Mehta

  Frustrated by an inability to convince existing venture capital firms to invest in companies led by women, people of color, and LGBT founders, Arlan Hamilton started her own firm, Backstage Capital, in 2015. Hamilton understood the untapped potential of companies run by underrepresented founders, a group historically excluded from venture capital funding, and was eager to demonstrate the significant returns on investment in such companies. This case explores Hamilton’s nontraditional VC background, and her mission to fund startups where at least one founder of the company identifies as a woman, person of color, or LGBT. Now, three years after its founding, Hamilton is considering launching both an accelerator and a fund that will invest exclusively in Black women.

  Keywords: venture capital; entrepreneurship; diversity; gender; race; black leadership; LGBTQ; women; people of color; Cultural Entrepreneurship; Mission and Purpose; Corporate Social Responsibility and Impact; Identity; Personal Characteristics; Prejudice and Bias; Social Issues; Diversity; Gender; Race;

  Citation:

  Huang, Laura, and Sarah Mehta. "Arlan Hamilton and Backstage Capital." Harvard Business School Case 419-029, October 2018.  View Details

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• Chapter | Handbook of Behavioral Economics | 2018

  Behavioral Household Finance

  John Beshears, James J. Choi, David Laibson and Brigitte C. Madrian

  This chapter provides an overview of household finance. The first part summarizes key facts regarding household financial behavior, emphasizing empirical regularities that are inconsistent with the standard classical economic model and discussing extensions of the classical model and explanations grounded in behavioral economics that can account for the observed patterns. This part covers five topics: consumption and savings, borrowing, payments, asset allocation, and insurance. The second part addresses interventions that firms, governments, and other parties deploy to shape household financial outcomes: education and information, peer effects and social influence, product design, advice and disclosure, choice architecture, and interventions that directly target prices or quantities.

  Keywords: Personal Finance; Global Range; Household; Behavior; Strategy; Governing Rules, Regulations, and Reforms; Product Design; Welfare or Wellbeing;

  Citation:

  Beshears, John, James J. Choi, David Laibson, and Brigitte C. Madrian. "Behavioral Household Finance." In Handbook of Behavioral Economics: Foundations and Applications 1, edited by B. Douglas Bernheim, Stefano DellaVigna, and David Laibson, 177–276. Amsterdam: Elsevier, 2018.  View Details

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• Article | Academy of Management Journal | March 2016

  The Role of Investor Gut Feel in Managing Complexity and Extreme Risk

  Laura Huang

  Securing financial resources from investors is a key challenge for many early stage entrepreneurial ventures. Given the inherent uncertainty surrounding a decision to invest in these ventures, prior research has found that experienced investors rely heavily on their investor gut feel—dynamic expertise-based emotion-cognitions specific to the entrepreneurship context. In this paper, I inductively find that rather than based on rapid, nonconscious impulse, as much of prior literature would suggest, what investors call their "gut feel" is an elaborate "intuiting process." This process serves a distinct purpose: it emboldens investors to make investments that would otherwise be considered overly risky and likely to lead to failure. In the theoretical model I present, I delineate how investors are guided by a predisposed stance on risk and uncertainty, which dictates the approach investors take towards managing the complexity of an investment opportunity—and how they cognitively and emotionally reframe investment risk into a compelling narrative that transcends avoidance behavior and leads investors to invest. These findings expand our overall understanding of the complex ways in which investors contend with the risks and uncertainties in entrepreneurial finance.

  Keywords: angel investors; gut feel; intuition; Entrepreneurship; Finance; Risk and Uncertainty; Complexity; Decision Making;

  Citation:

  Huang, Laura. "The Role of Investor Gut Feel in Managing Complexity and Extreme Risk." Academy of Management Journal 61, no. 5 (October 2018): 1821–1847.  View Details

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