Hebrew University research shows the better you sell yourself, the more seed money you’ll secure.
Crowdfunding works best when entrepreneurs boast about their successes, according to an Israeli study. (Shutterstock)
Job-seekers are always told to sell themselves. Now, Israeli researchers at the Hebrew University of Jerusalem say those looking for seed money to launch entrepreneurial ventures
need to boost themselves as well.
Prof. Orly Sade and her graduate student Dan Marom of the Jerusalem School of Business Administration at the Hebrew University set out to find whether prospective investors are influenced in their investment decisions by the entrepreneurs’ description; and whether entrepreneurs should focus their business pitches on themselves or on their projects.
“In an era in which crowdfunding is a growing source of venture capital [more than $2.7 billion was raised in the US in this manner in 2012], it is important for academics, investors and those seeking funds to have a basis for aiming their pitches in the most effective manner,” said Sade.
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 the 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. They also found that this emphasis on the entrepreneur was directly related to the probability of success in securing seed funding in the artistic category.
Sade and Marom have already presented their groundbreaking research at conferences in Spain, Norway, Holland, Israel and the US. Most recently they presented at the annual meeting of the Association of Financial Economists in Philadelphia.