FinBioScan - Behavioral Finance Tool to Analyze the Potency of Biotech Startups

The biotech industry presents a twofold challenge to investors: complicated scientific uncertainty and the effect of cognitive biases in the funding decisions the investors make. The literature on behavioral finance and entrepreneurship suggests that when investors are pitched biotech startups, the investors often rely on narratives, framing, signals of prestige, and emotional appeals, rather than taking data integrity under consideration. This paper provides FinBioScan, an actionable diagnostic framework, to assess investor presentations and quantify the number of bias-induced persuasive strategies used. FinBioScan uses a rubric that captures information from six categories of bias - Scientific Transparency, Narrative Manipulation, Visual Framing, Signal Boosting, Data Omission, and Investor Framing - to develop a bias profile for each startup. Sample applications to selected biotech companies showed that FinBioScan can correctly identify cognitive biases in which investors may be persuaded. The framework does not seek to predict scientific outcomes or commercial success; it simply provides investors with another structured lens to possibly identify the extent of cognitive bias that may have influenced their funding decision.