Emphasizing the entrepreneur or the idea? The impact of text content emphasis on investment decisions in crowdfunding
Introduction
Crowdfunding campaigns catch investors' attention in one of two ways: (1) by advertising the creativity behind the project, or (2) by highlighting the fundraiser's qualifications, such as education background, skills, awards, credit, reputation, and so on. In some situations, where the text length is limited (such as in project titles and blurbs), entrepreneurs cannot highlight one aspect without relinquishing the other. Therefore, entrepreneurs face a trade-off between two types of strategies for text content emphasis (TCE): highlighting either the entrepreneur profile or the idea creativity. Even in the detailed description where entrepreneurs have enough space to describe both aspects, they still need to weigh the priority of the two types of TCE.
Creativity is one of the determinants in attracting investors to support startups [1]. Despite the lack of a universal definition of creativity, there is a consensus that a creative solution is characterized as being new and useful [2]. But there are far fewer discussions on the entrepreneur profile. In this paper, we study the impact of TCE, emphasizing either the entrepreneur profile or the idea creativity, on investment decisions in crowdfunding. Specifically, we propose the following two research questions as shown in Fig. 1: (1) how TCE affects fundraising results when entrepreneurs highlight either the entrepreneur profile or the idea creativity, and (2) which aspect of TCE should be placed at the beginning of the narrative if entrepreneurs describe both aspects. Question 1 tries to estimate the influence of TCE when only one aspect is highlighted. While Question 2 attempts to explore how to choose a reasonable strategy when the entrepreneur intends to emphasize both aspects.
To address the questions above, we define TCE as how much the text emphasizes one specific aspect (either the entrepreneur profile or the idea creativity), while the other aspect is downplayed. TCE is not a binary classification. Instead, it is similar to a probability estimation, which estimates the degree of emphasis on one aspect or the other. One side is likely to be weakened if the emphasis is on the other side [3]. Consider the following examples from two real cases:
- (1)
We are the iGem team! Last year, we successfully tested a plasmid that identifies fluoride bioswitches. We won an award at iGem, the largest synthetic biology competition.
- (2)
This project proposes an experimental and multi-physics simulation of a novel Acoustic Emission (AE) technique for damage monitoring in these structures. While the conventional methods do a delayed monitoring and use many actuators, AE monitoring gives the real-time damage information without any actuator.
The first narrative focuses on the promotion of the entrepreneur profile, while the second narrative concentrates on the idea creativity. If the TCE strategy is not appropriate in the project narrative, its attractiveness will decrease. Sometimes both the entrepreneur profile and the idea creativity can be introduced simultaneously. In such cases, however, the presentation order will matter to readers' perception of the project, thus swaying their willingness of investment. Therefore, in addition to highlighting certain aspects, entrepreneurs need to determine the TCE prioritization.
Using real data from Kickstarter campaigns, we aim to explore the impact of TCE on successful fundraising pitches to enrich our understanding of how narrative factors influence online financing. Practically, this study can improve our understanding of TCE's value and guide entrepreneurs to create more engaging crowdfunding narratives.
Section snippets
Literature review
In the areas of titles or blurbs where the text is subject to length limits, entrepreneurs can hardly detail both aspects. However, strengthening one aspect will inevitably result in weakening the other [4]. Hence, entrepreneurs face challenges similar to those from more than 50 years ago: they must persuade readers to take the expected actions [5]. Hovland's persuasion model suggests that the content of a message is an antecedent of the audiences' attitudes [6].
On the one hand, crowdfunding
Research data
Fig. 3 illustrates the research framework, which includes four major steps: (1) collect raw data, (2) preprocess the corpus, (3) build the TCE detection model, and (4) estimate the impact of the TCE on the funding outcomes.
Kickstarter is one of the most famous reward-based crowdfunding platforms in the world. We collected the information of the crowdfunding campaigns during an observation period from April 21th, 2009, through March 8th, 2017. Our data consist of 126,593 entrepreneurial projects
Summary statistics
Table 3 reports the descriptive statistics of the sample. In terms of funding outcomes, approximately 52.2% of the projects are successfully funded. The average pledged ratio is 245.7%, which means that an average project would achieve more than two times its funding goal. The possible reason is that some projects have obtained capital far beyond the funding goals, thus resulting in a substantial standard deviation (161.618). Meanwhile, the median project achieves 100.1% of its funding goal,
Practical implications for entrepreneurs and decision support
In this paper, we intend to answer two questions: (1) whether and how TCE affects fundraising outcomes when entrepreneurs highlight a particular TCE aspect, and (2) how and where the TCE aspect should be placed in the narrative if entrepreneurs describe both the entrepreneur and idea aspects. The empirical analysis of 126,593 crowdfunding campaigns indicates that the TCE strategy matters to investment decisions.
We find that entrepreneur profiles should be highlighted in the title, blurb, and
Acknowledgments
All authors wish to thank the journal’s editors and reviewers for feedback and comments that helped to improve the quality of this paper. Separately, Wei Wang and Hongwei Wang acknowledge the support by the NSFC Grant (71601082, 71771177), Fujian Natural Science Foundation (2017J01132), Innovation Fund for University Production, Education and Research from Ministry of Education (2019J01012). Wei Chen and Kevin Zhu did not receive any support from these projects, and were not involved in any of
Wei Wang, Ph.D., is an Associate Professor at the Department of Information Management, College of Business Administration, at Huaqiao University. His research interests include crowd funding, sentiment analysis, text analysis, and electronic commerce. His work has appeared in academic journals including Computers in Human Behavior, Behaviour & Information Technology, Industrial Management & Data Systems, Journal of Experimental & Theoretical Artificial Intelligence, New Review of Hypermedia
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Wei Wang, Ph.D., is an Associate Professor at the Department of Information Management, College of Business Administration, at Huaqiao University. His research interests include crowd funding, sentiment analysis, text analysis, and electronic commerce. His work has appeared in academic journals including Computers in Human Behavior, Behaviour & Information Technology, Industrial Management & Data Systems, Journal of Experimental & Theoretical Artificial Intelligence, New Review of Hypermedia and Multimedia, Management World (China), Journal of Management Sciences in China, Systems Engineering—Theory & Practice, among others. He holds a Ph.D. from Tongji University in Shanghai, a master's and a bachelor degree from Huaqiao University in Quanzhou, China.
Wei Chen, Ph.D., is an Assistant Professor at Management Information Systems, Eller College of Management, The University of Arizona. He received his Ph.D.in Innovation, Technology and Operations from the University of California, San Diego. His research interests include crowdsourcing, peer production, fintech and business analytics. His work has appeared in academic journals including Information Systems Research, MIS Quarterly, and so on.
Kevin Zhu earned his Ph.D. from Stanford University and is Professor of Innovation, Technology and Operations (ITO) in the Rady School of Management, University of California, San Diego. His work focuses on technology-enabled innovation, next generation of information technologies (big data, AI, blockchain, FinTech) and their adoption in the business world, and economic impacts of information technology. His research has been published in the top academic journals such as Management Science, Information Systems Research, IEEE, MIS Quarterly, and Marketing Science. He has held editorial positions at the top academic journals and co-chaired major conferences. His work has been cited more than 10000 times by other scholars (Google Scholar) with high impact (h-index 28).
Hongwei Wang, Ph.D., is a Professor of Management Information System, School of Economics and Management, Tongji University. He graduated with a Ph.D. from Shanghai Jiao Tong University. His research interests include business intelligence, text analytics, social network, and their interdisciplinary areas. His work has appeared in academic journals including Journal of Organizational Behavior, International Journal of Hospitality Management, Decision Support Systems, Management World (China), Journal of Management Sciences in China, among others.