I strongly agree. Much of Europe’s so-called “risk aversion” is in fact "ambiguity aversion" aka Knightian uncertainty. Early-stage venture tolerates ambiguity because failure is expected. However, as companies scale, financial risk often decreases, but ambiguity increases (execution, market, exits, governance) which leads European Capital to retreat.
Interstingly, it was recently shown that "ambiguity deters investment more than an equivalent risk."
I strongly agree. Much of Europe’s so-called “risk aversion” is in fact "ambiguity aversion" aka Knightian uncertainty. Early-stage venture tolerates ambiguity because failure is expected. However, as companies scale, financial risk often decreases, but ambiguity increases (execution, market, exits, governance) which leads European Capital to retreat.
Interstingly, it was recently shown that "ambiguity deters investment more than an equivalent risk."
see https://www.nber.org/papers/w34516
Interesting resource. Thanks for sharing. I really appreciate it. Had never read about the topic, so really looking forward to dive into it.