The Effects of Founder-Favorable Deal Terms on Evaluators' Perceptions of Pitch Ambiguity Under Knightian Uncertainty

Information-asymmetry theory predicts that terms unusually favorable to the recipient can increase perceived ambiguity because the recipient infers hidden defects. Under Knightian uncertainty, however, future value cannot be known by either party, so founder-favorable terms may instead increase ambiguity by placing more future value outside what current evidence supports. We test this claim in a randomized experiment in early-stage technology finance. Sixty-four people with informal investment experience screened 12 Techstars pitch decks across three conditions: no deal terms, evaluatorfavorable deal terms, and founder-favorable deal terms. The manipulation varied the valuation cap, round size, ownership percentage offered, and capital already committed. Founder-favorable terms produced higher perceived ambiguity than evaluator-favorable terms (b = 0.261, SE = 0.122, p = .033, n = 544). A joint Wald test did not reject equality of effects across the four dimensions (χ²(3) = 3.400, p = .334). The findings suggest a boundary condition for information-asymmetry predictions: in early-stage venture pitches, founder-favorable terms increase ambiguity relative to evaluator-favorable terms.