Traditional venture capital invests with a “gut” feeling approach, and as VentureBeat’s Christina Farr recently put it, “Relying on gut feeling simply isn’t good enough anymore”.
Investors suffer from a number of cognitive biases. The biggest, most powerful and most dangerous bias in Silicon Valley today is called the “herd mentality” or “bandwagon effect.” It’s difficult to oppose the general consensus.
As investors, this and other cognitive biases skew our decision-making process every day. How do you get around it? We believe that the answer lies in mathematics. If we can work with models that are built to protect us from human biases, guide us through the turbulent waters of high-risk investing and incorporate factors of safety, that would be a better option than swinging for the fences to make up for losses.
To read the original article: The Moneyball strategy is the future for venture capital firms | VentureBeat
