The role of entrepreneur’s experience and company control in influencing the credibility of passion as a signal in equity crowdfunding

ABSTRACT

In this study, we focus on entrepreneurs’ passion as a signal in influencing fundraising success via equity crowdfunding. Moreover, we look at the role of entrepreneurs’ task-specific experience – industry and startup experience- and company control in influencing the credibility of passion as a signal.

Through a text analysis of 606 equity crowdfunding campaigns in the UK, we found that entrepreneurs’ displayed passion positively influences funding success and that entrepreneurs’ startup experience reinforces the credibility of this signal, i.e., the impact of passion on fundraising success. Additionally, we found that when entrepreneurs retain more shares of the company, the influence of displayed passion on funding success is greater. Our study contributes to the crowdfunding literature highlighting the importance of entrepreneurs’ passion in influencing fundraising success via crowdfunding, and what influences the credibility of passion as a signal.

KEYWORDS:

• Equity crowdfunding
• entrepreneurs’ passion
• task-specific experience
• company control
• signal credibiltiy

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1. See Franzoni and Tenca (2022) for a complete overview of the methodology adopted to develop the dictionaries.

2. The full word lists are available upon authors’ request.

3. We used Linguistic Inquiry and Word Count (LIWC) 2015, which is a text analysis program that calculates the degree to which various categories of words are used in a text and allows identification of categories describing language at a very basic linguistic level (Pennebaker, Mehl, and Niederhoffer 2003).

4. The video is more frequently dedicated to describe product features and it is more concise. The text is normally longer and comprises more information on the product and the venture. Moreover, the scales and metrics through which videos and texts assess passion are somehow different, even if they aim at capturing the same construct (i.e., videos look at facial expression and body language on the basis of Chen, Yao, and Kotha (2009)’s scale, while texts look at language evoking passion, enthusiasm and commitment of the entrepreneurial team).

5. The full word lists are available upon authors’ request.