Executive Summary
Many early-stage startups acquire funding through contests in which founders take turns pitching their companies before a panel of investors. Based on observations of a series of four pitch competitions, the authors determined that the first two contestants were consistently rated lower than later pitches, even when controlling for potential compounding factors such as race or gender. Based on this counterintuitive finding, the authors suggest that founders should try to avoid pitching first, and that investors should do their best to limit the impact of these order effect biases by proactively reconsidering their earlier evaluations.
Research shows that in many types of sequential competitions, the order of competitors can have a significant effect on judges’ evaluations. In some music and sports competitions, for example, competitors who go last have an advantage, while in sales or persuasive argumentation, studies have shown that going first is advantageous. But what effect does competitor order have for startup pitch contests?
We conducted four pitch competitions with business student entrepreneurs as a field experiment to determine whether — and how — the order of pitches affects investor interest. We were genuinely uncertain what we would find: In music and sports contests, latter contestants tend to do better because judges pay more attention to the ways in which each performance is better than previous performances, and so it was plausible that similar effects would be applicable at our events. Alternatively, pitch competitions could be similar to persuasive arguments, where the first contestant enjoys a primacy advantage because evaluators often anchor on the first argument, making them less open to different ideas. Or perhaps we would find no order effects at all.
At our events, panels of local investors judged a series of 15 to 22 pitches. Despite the fact that pitch order was assigned completely at random, we found that the judges consistently rated the first two pitches lower than later pitches.
These results held even when controlling for demographic characteristics known to affect investor interest, such as race and gender. In addition, the participants were sequestered in a training room while waiting for their turn to pitch, so they were unable to gain an unfair advantage by watching and learning from the judges’ reactions to previous pitches.
What could account for this bias against the first two pitches? It’s possible that the judges went through a calibration process. Perhaps they had recently been exposed to different markets, or ventures at different stages, or entrepreneurs whose capital needs were vastly different from those pitching at our events. If the judges were expecting the next Dropbox or Spotify, it may have taken them some time to adjust those expectations to our cohort of early-stage startups.
And if that’s the case, then this order bias likely wasn’t unique to our study — after all, the relative quality of founders and startups is constantly evolving in response to technological innovations, current events, and new market opportunities, and so investors tasked with evaluating these opportunities are likely to experience these biases at any sequentially organized event.
What This Means for Entrepreneurs:
Unfortunately, you don’t often get to choose your place in the pitching order. But if you can, do your best to avoid pitching first. This may feel counterintuitive for some entrepreneurs, as going first may feel like a move that signals initiative and a go-getting attitude — traits that are generally a positive for startup founders. But the research shows that when it comes to pitch contests, jumping into the shark tank first doesn’t pay off.
What This Means for Competition Organizers:
Nobody benefits from running an unfair event. The tech industry is already fraught with bias stemming from problems that are much harder to solve, such as racism, sexism, ableism, and more. Pitch order bias is a much simpler problem.
Event organizers can reduce unfairness simply by randomizing pitch order to give each competitor an equal chance at the advantageous pitch slots. In addition, to limit bias against earlier pitches, organizers can instruct judges to revisit their first few evaluations after they have had a chance to calibrate their expectations. Further research is needed to test this solution and determine the extent to which order effects can be counteracted with these simple changes.
What This Means for Investors:
Investors strive to make rational decisions about where their money goes. Once you become aware of the existence of order effects, you can deliberately counteract them by revisiting your initial judgments after all the pitches are complete. Don’t let something as meaningless as pitch order impact your evaluations and cause you to overlook a good opportunity.
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September 01, 2020 at 08:11PM
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In Pitch Contests, Going First Is a Disadvantage - Harvard Business Review
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