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CMA Final · Entrepreneurship and Startup · Entrepreneurial Skill Sets

Sanjay, a Bengaluru SaaS founder, is convinced his product will win and keeps ignoring customer interviews showing weak demand, citing only the three enthusiastic early users. He then raises more capital to expand sales. Which combination of cognitive bias and its likely consequence is most accurate?

This is confirmation bias leading to over-investment in an unvalidated market. Sanjay favours the few supportive users and dismisses contrary customer interviews, then commits more capital to expansion. Loss aversion would push toward quitting early, and hindsight bias concerns past events, so neither fits his behaviour.

  1. AConfirmation bias, leading to over-investment in an unvalidated marketCorrect
  2. BLoss aversion, leading to premature shutdown of a validated product
  3. CAnchoring on competitors' prices, leading to underpricing only
  4. DHindsight bias, leading to better forecasting of demand

Explanation

Sanjay selectively uses evidence supporting his belief (the three enthusiasts) and dismisses contrary interviews, which is confirmation bias. The consequence is scaling spend before demand is validated. Loss aversion would cause him to quit early, which is the opposite of what he does, and hindsight bias relates to judging past events.

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