would expect that entrepreneurs who pitch their startup ideas with passion are
more apt to entice investors. Now there’s scientific proof the two are
connected: enthusiasm and financial backing.
to new research from Case Western Reserve University, the brains of potential
investors are wired to pay closer attention to entrepreneurs who pitch with
examined investors’ neural responses to entrepreneurs’ pitches, conducting a
randomized experiment that explored the response of investors’ brains using
functional Magnetic Resonance Imaging (fMRI)—finding a causal relationship
between passion of the pitcher and interest from investors.
has ever invested in a startup they ignored,” said Scott Shane, the A. Malachi
Mixon III Professor of Entrepreneurial Studies in the Weatherhead School of Management
at Case Western Reserve.
“Founder passion is essential to establishing investor attention, and our study demonstrates measurable neural effects that offer a biological explanation for their tendency to react positively to enthusiasm and emotion of entrepreneurs,” said Shane, lead author of the paper, published in the Journal of Business Venturing.
showing such energy in pitching their business ideas, entrepreneurs can
considerably increase neural engagement in potential investors—increasing the
odds these financiers will support a new, untested venture by having strong,
measurable effects on their decision-making.
“Most of time investors just say ‘no,’” said Shane. “In fact, the vast majority of entrepreneurs never receive a dime from external investors.
should know: More engaged brains are more likely to meaningfully evaluate
pitches,” he said. “We believe our data makes a strong argument that displays
of passion trigger heightened engagement that, in turn, makes investors more
likely to write a check.”
of pitches—identical in content but different in delivery—were randomly
assigned to investors inside an fMRI machine. Depending on the passion-level of
the pitch, investors’ brains reacted differently: Heightened displays of
passion increased investor fixation on the stimulus (the pitch) to override
distractions—and demonstrate a causal effect of displayed passion on investor interest.
randomly assigned a pitch with high founder passion resulted in informal
investor interest increasing by 26%, relative to the same pitch delivered with
from fMRIs showed investor neural responses to entrepreneurs’ high-passion
pitches increased investor neural engagement by 39% over lower founder passion.
engaged brains are more likely to meaningfully evaluate pitches—and not play on
their phones or think about lunch—which should result in more favorable
investor assessments,” said Shane.
it’s possible that other mechanisms may be present in the brains of
investors—such as inferring from passion that entrepreneurs may be more capable
or competent—the experiment showed that passion is a key mechanism because it
causes investors to pay attention, said Shane.
The practice of passion
findings offer strong implications for the practice of entrepreneurship.
with enthusiasm and passion—these are skills that can be taught,” said Shane.
“Flat, unenthusiastic pitches are the enemy of attracting investor attention
and to succeeding in a competitive, cutthroat environment.”
year, hundreds of thousands of early-stage entrepreneurs, who often lack
established track records, offer pitches—widely recognized as the gateway to
investor funding—to financiers across the globe.
The study focused on informal investors—referred to as “family, friends and foolhardy strangers” by the Global Entrepreneurship Monitor — who account for most startup investments, investing $1 trillion globally between 2012-15, according to the organization.
The study was co-authored by David Clingingsmith, an associate professor of economics at the Weatherhead School. Will Drover of the University of Oklahoma, and Moran Cerf of Northwestern University also co-authored the paper.