How Investors Choose Startups to Finance

Many would-be entrepreneurs think that people who invest in early-stage companies have a complex and sophisticated decision-making process, akin to what happens on Wall Street. But, unlike the world of high finance where investors gather copious amounts of information and use complex computer modeling to make decisions, investors in early-stage companies spend very little time and gather very little information when making choices.

Perhaps perversely, this approach makes perfect sense.

Before I get into why it makes sense, let me explain how most early-stage investors make decisions. Venture capital firms and angel groups typically screen the business opportunities they receive