Media Mentions as Rose-Colored Glasses: Availability Bias in Venture Formation

Abstract

Despite its rarity, venture capital raising has captured the media’s attention rather than the far more common occurrence of venture death. We shed light on a situational factor that influences why founders overoptimistically believe they can beat the odds of failure when already familiar with the low base rates of market entry success. Drawing upon the entrepreneurial cognition literature regarding the availability heuristic, we theorize that frequent media mentions make information about fundraising more “available” to prospective entrepreneurs, increasing their motivation to start a venture by causing them to overestimate the magnitude of funding they will be able to raise. We find significant support for this theory through a mixed methods approach—encompassing a ten-year archival study, a randomized experiment (N = 317), and an entrepreneur survey (N =110)—that accounts for macroeconomic factors and personal characteristics, including levels of dispositional optimism and prior knowledge. Implications for both theory and practice are considered.