Idea uncertainty and founder-idea fit: Evidence from a field experiment

(with Aaron Chatterji)

A key hurdle faced by early-stage entrepreneurs is resolving the uncertainty around their business ideas. This challenge, scholars suggest, may lead to suppressed levels of entrepreneurial entry, or worse, the inefficient expenditure of effort on weak ideas—especially ones that a founder may be unsuited to execute. One way that entrepreneurs can overcome this friction is by getting expert advice, but prior work suggests such advice is often costly, idiosyncratic, and scarce. We investigate whether reducing the cost of idea evaluation will lead entrepreneurs to generate more and higher-quality ideas. We conducted a field experiment that provided early-stage founders with technology—a conversational A.I. platform to automatically research competitors, customers, and business models—to help them assess the market uncertainty of their ideas. We find that reducing the cost of evaluating market uncertainty leads entrepreneurs to generate more ideas, select those that are a better fit for their skills, and carry out more steps in the startup process. This finding is strongest for founders who are motivated by challenge and contribution, and less by money or status. Our results show that by reducing the cost evaluation, an important challenge faced by entrepreneurs can be overcome, especially in places where expert advice is scarce.