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Statistics

Collider bias: founder pedigree and idea quality among funded startups

collider-biasselection-biasberksons-paradox

A VC observes that among the startups her firm has funded, founder pedigree and idea quality are negatively correlated: the stellar founders tend to have so-so ideas, and the standout ideas come from less-credentialed founders. Across the full population of startups that pitch, the two are unrelated. She wonders if great founders are lazy about ideas.

Explain why the funding decision induces this negative correlation, and why her worry is misplaced.

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Colliders and Collider BiasBerkson's ParadoxThe Heckman Selection CorrectionRange Restriction in Selected SamplesA Benchmarking Harness for New Signals

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