Investor Type, Cognitive Governance and Performance in Young Entrepreneurial Ventures: A Conceptual Framework

This article contributes to a better understanding of the process of entrepreneurial finance from a behavioral perspective. We specifically examine the cognitive features and interaction of three key-actors in entrepreneurial finance: entrepreneurs, business angels and venture capitalists and derive implications for performance (value creation and growth) when a young venture raises external equity capital. Concepts of cognitive cost and value enhance theoretical insight into why BA and VC intervention is typically sequential. We also predict in what specific situations one should expect simultaneous coinvestment by BAs and VCs and how investors can use cognitive levers to influence the speed of growth.