Michelle Rogan, University of Oxford, Saïd Business School

Switching sides at the same table: Do former entrepreneurs make better investors?

Research on post-entrepreneurial career transitions has highlighted paths into traditional employment, yet entrepreneurs often transition within the entrepreneurial ecosystem—particularly into start-up investor roles. Building on research into career transitions, we argue that investors who are former entrepreneurs will underperform compared to non-entrepreneur investors. Remaining in the start-up context, former entrepreneurs are prone to misjudging the similarity of the requirements of the entrepreneur and investor roles, triggering routines and sustaining imprints from the entrepreneur role, and misapplying knowledge and routines to the investor role, which leads to inferior performance compared to other investors. Focusing on selection behaviors, we predict that compared to non-entrepreneur-investors, entrepreneur-investors are more likely to select ventures with higher potential for involvement and whose needs align with knowledge from their entrepreneur role and that this approach results in lower investment performance. A matched-sample analysis of investors in the United States from 2000 to 2020 shows that entrepreneur-investors select ventures in an earlier stage and with more industry overlap, and consequently have lower performance. Our study adds to the literature on entrepreneurial careers and career transitions by arguing and showing how distinctive behaviors ingrained from entrepreneurship, rather than negative social evaluation, affect post-entrepreneurship outcomes in entrepreneurial careers.