This is a guest post provided by Prof. Orly Sade and Dr. Dan Marom of the Jerusalem School of Business Administration at the Hebrew University.
Securing seed funding is one of the biggest challenges for any entrepreneur. When pitching the initiative to investors, there are various methods the entrepreneur can call upon in order to convince the investor to fund the project. Most notably, the entrepreneur may decide to place the emphasis of the pitch on the business idea. Alternatively, the entrepreneur may center the presentation on his personage, calling upon his name, resume, or past accomplishments.
Are prospective investors being influenced in their investment decisions by the entrepreneurs’ description? Should entrepreneurs focus their business pitches on themselves or on their projects? The answer, for some fund seekers, is: don’t hesitate to focus on yourself and mention your name.
Research on this issue has been carried out by Prof. Orly Sade and Dr. Dan Marom of the Jerusalem School of Business Administration at the Hebrew University. Sade and Marom’s research empirically investigated the importance of the entrepreneurs’ description in the early investment pitches of more than 20,000 fundraising efforts, conducted by various entrepreneurs through a leading, US-based crowdfunding platform — Kickstarter.
Using custom software to collect the investigated data, they amassed a database from Kickstarter consisting of 4,304 ongoing projects, 16,641 successful projects, 4,128 failed projects, 22,274 entrepreneurs, 1,108,233 investors, and investments that sum up to more than $120 million. The period investigated in the project was from the inception of Kickstarter, in April 2009, up until March 2012.
Focusing on the frequency of the mention of the entrepreneur’s name in the funding applications, the researchers found that this factor was significantly higher in the applications involving “artistic” projects (those ventures involving such areas as entertainment, food, music, fashion and others) than in the technological category. Further, they found, that this emphasis on the entrepreneur was directly related to the probability of success in securing seed funding in the artistic category.
In an era in which crowdfunding is a growing source of venture capital, it is important for academics, investors and those seeking funds, to have a basis for aiming their pitches in the most effective manner. Sade and Marom’s research helps the entrepreneur understand better the impact of how they choose to pitch.