“…Second, we contribute to studies examining how trust lubricates entrepreneurial activity (Welter and Smallbone, 2006;Welter, 2012;Scarbrough et al, 2013;Pollack et al, 2017), especially transactions with financial resource holders, such as VC investors. This line of research has highlighted investors' trust in entrepreneurs as an essential consideration in funding decisions, as trust mitigates the adverse selection and moral hazard problems involved in funding entrepreneurs (e.g., Harrison et al, 1997;Maxwell and Levesque, 2014;Bottazzi et al, 2016;Müller and Wöhler, 2023). Typically, entrepreneurs have an informational advantage vis-à-vis investors, and may exaggerate the prospects of their ventures, or hide negative information to attract investors.…”