Wed, 1 March 2023
The halo effect is a cognitive bias defined by Wikipedia as the tendency for a person's positive or negative traits to "spill over" from one personality area to another in others' perceptions of them.
Investors often presume those who are good at pitching and are passionate are also good at running the business.
This often leads to investments in startups that are missing key success factors.
To overcome the halo effect, investors should be aware of it and look for evidence that the founder can run the business.
Investors should have specific criteria for making an investment and should assess the startup for that criteria.
Investors need to have an accurate understanding of the startup's strengths and weaknesses as the investor may need to step in and help fill any gaps.
Keeping in mind the cognitive bias will help investors overcome it and focus on the core aspects of the startup.
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