5 Books every venture capital investor should find under the christmas tree
by Eva Gfrerer and Tanja Jänicke
Christmas is approaching and some of you might be on the lookout for some last-minute gifts. We will share today our Top 5 books every venture capital investor should find under the christmas tree.
You do not know any VC investors? Or you do not want to make them a gift? No worries. Those books will excite everyone who is curious, open-minded and a little bit nerdy.
We will include an Amazon link to all books so you or Santa can track them down. However, feel free to order them in your local book store.
- Think again by Adam Grant
Adam Grant is a professor for psychology at the Wharton School and an expert for organizational behavior. In his new book he shows how intuition can fool us and why it is worth to rethink our own beliefs and opinions regularly.
Why read it?
Venture capital decisions are grounded in beliefs that are not state of the art anymore. Many investors still cling to the idea that founders have to gain access to the investor’s networks in order to deserve their attention. Investors regularly emphasize that sympathy and getting along with a founder are good indicators for a successful investment. This attitude leads to biased decisions and inefficient allocation of capital. About time for venture capitalists to rethink their approach.
2. Noise by Daniel Kahneman, Oliver Sibony and Cass R. Sunstein
Nobel-prize winner Daniel Kahneman is one of the great minds behind behavioral economics. Together with his research partner Amos Tversky, he showed how human beings systematically deviate from rational decision-making. Their research contributed to models that help us understand how decision makers perceive probabilities and how reference points influence outcome evaluation. They also identified several heuristics and biases individuals succumb to. In his best-selling book “Thinking fast and slow”, Daniel Kahneman promotes the dual-system theory which describes our brain working in two different systems: system 1 stepping in at fast and frugal decisions such as buying chewing gum and system 2 acting in more complex decision set-ups such as choosing an education.
In his newest book he explains together with the renowned scientists Oliver Sibony and Cass R. Sunstein (co-author of “Nudge” ) how unwanted variability, i.e. noise, influences decision outcomes in an organization. The authors turn their focus from the individual to organizational decision making. They analyze the differences between biases and noise and offer advice how organizations can reduce noise in their decision processes.
Why read it?
Our research at Morphais showed that decision processes in venture capital are not standardized. They are highly manual and based on gut feeling. Therefore, they are prone to both decision biases and noise. This book can help teams of investors to make better decision based on objective criteria.
3. How to change by Katy Milkman
Katy Milkman is a behavioral scientist and professor at the Wharton School. She founded and leads the “Behavior Change for Good” Initiative. In her recent book “How to change” she provides valuable research insights based on her own empirical studies and those of her colleagues. She analyzes why people struggle to change their habits and offers advice on how to implement strategies to change your own behavior.
Why read it?
Recent data shows that venture funded founders are very homogeneous. 90% of them are male and the majority is white. That means diversity in venture capital is in a very dark almost non-existing place. This statement holds for both Europe and the US. This lack of diversity is not only unfair because it denies chances to a large group of the population. It is also not smart because there is ample empirical evidence that diverse teams contribute to better performing funds. That means in order to be more successful, venture capitalists have to change their habits of allocating funds. They have to step out of their similarity bubble and this book can support them in finding the right strategy to do that.
4. Superfounders by Ali Tamaseb
The big question of venture capital is: What makes a start-up successful? Ali Tamaseb answers this question based on hard data. He tracked numerous start-ups and their founders over years, reconciled different data bases, enriched it with Linkedin Data and added information from interviews with successful founders. He follows a strictly empirical approach and derives surprising and interesting findings about the determinants of “superfounders”.
Why read it?
Only 5% of venture capital firms use data-driven approaches to select start-ups for funding. The rest relies mainly on gut feeling and their subjective experience. This book offers great data-driven insights potentially serving as an inspiration to the 95%.
5. Was Männer nie gefragt werden by Fränzi Kühne
This book is currently only available in German but will hopefully be published in English soon.
Fränzi Kühne is an entrepreneur who founded one of the first social media agencies in Germany. She was the youngest board member in a German DAX Company and acts as a strong promoter of gender equality.
For this book she collected questions posed to her during interviews over the years. Many questions revolved around her fashion choices, her role as founder and mother and whether her husband approves of her career choices. Now she turns the table and asks those questions to successful men — managers, entrepreneurs, scientists and politicians. This is sometimes funny, often shocking and from time to time even sad. Above all, it illustrates how differently male and female leaders are treated still today.
Why read it?
In 2018, Dana Kanze and her co-authors published a study revealing that investors systematically ask different questions to female and male founders during pitches. While male founders receive promotion-focused questions asking for chances, potential profits and revenue growth, female founders receive prevention-focused questions about threats, strategies to avoid decreasing profits and revenue decline.
Besides similarity bias, false gender stereotypes are one of the predominant reasons for the shockingly low number of venture-backed female founder teams of 2% . This book can help venture capitalist investors to become aware of their own gender stereotypes.
At Morphais we believe that entrepreneurial talent is equally distributed but access to capital is not. As a Quant VC we use data to make more accurate and fairer decisions. Based on machine learning algorithms we enrich our decisions with objective indicators and data-driven recommendations. We use technology and a standardized investment process to prevent bias and noise and make better investment decisions.
We hope you find our list helpful. Feel free to share it.
Morphais VC wishes you happy holidays and a happy new year.
See you in 2022. 🚀
