Behavioral Entrepreneurial Finance

This textbook systematically examines cognitive biases, heuristics, and emotional influences that shape investors’ decisions throughout the entrepreneurial journey, from evaluating opportunities to securing funding, valuation, and exit strategies. Based on principles from behavioral finance and cognitive psychology, this book questions the traditional belief in rationality.

While mainstream finance emphasizes risk and return, entrepreneurial finance deals with managing extreme uncertainty and very high risk. Startups without proof of technology and with still-developing business models, operating in weakly defined markets, are seeking funding. Behavioral finance offers tools to understand how investors decide in these challenging environments. This book explores how mental shortcuts (heuristics) and systematic deviations from rationality (biases) interact with the unique aspects of entrepreneurial settings. It provides a multidisciplinary, empirically grounded approach for students, researchers, and practitioners.