Publications
Publications
- 2024
- HBS Working Paper Series
Priors, Experiments, Learning and Persuasion in (Bayesian) Entrepreneurial Finance
By: Ramana Nanda
Abstract
At the heart of entrepreneurial finance lies a persuasion challenge: regardless of
the strength of an entrepreneur’s belief in the potential of their idea, they typically
need to convince investors to provide the financial capital required for its commercialization.
How should entrepreneurs approach this challenge in order to maximize
the chance of raising the required external finance? Why does it appear harder
to persuade venture capital investors to finance startups in certain industries and
regions and in certain periods of time? Are there systematic frictions preventing entrepreneurs
from effectively persuading investors in certain settings and if so, what
can be done to reduce them? In this chapter, I discuss answers to these and other
questions through a conceptual framework in which investors update their beliefs
about a startup’s prospects through a sequence of investments over time.
Keywords
Citation
Nanda, Ramana. "Priors, Experiments, Learning and Persuasion in (Bayesian) Entrepreneurial Finance." Harvard Business School Working Paper, No. 25-020, October 2024.