Science provides an explanation for why investors finance startups.
You may recall the disastrous start-up WeWork that Adam Neumann co-founded. Due to the enormous and explicit losses that the creator inflicted on his investors in the fall of 2019, it has been seared into people's memories.
The businessman is back in the spotlight with a project for which he has already acquired at least 350 million dollars in funding, despite this very heavy pan (about 345 million euros).
Therefore, it is essential to think that in the "start-up nation," investments made in a project are more likely to be influenced by the creator's communication skills than by the product's potential for financial success.Because Silicon Valley business owners must give a presentation, often known as a "pitch," in order to secure funding.
Business Insider looked at several studies that help understand what differentiates a good pitch from a bad one. Spoiler alert: purely economic data, such as market size, plays only a minimal role in the decision to invest.
Zenia Kish is a professor at the University of Tulsa (Oklahoma). She explains that a pitch is a staging, and that the most important thing is to inspire confidence in potential investors.
"That was one of the things that fascinated us the most during our research: how much personality and charisma were intentionally emphasized." The fact is that the more charisma a person and the confidence it inspires are valued, the less we dwell on the reality of the figures.
But then what are the factors that lead to blindly following someone? In 2008, researcher Colin Clark asked twenty-four investors to evaluate the pitches of three entrepreneurs and determine what convinced them.
It emerged that the economic data had practically no weight, but that what had seduced them were, among other things, the style and fluency of the entrepreneur. And that the most important criterion for them was his "passion".
Now, according to Clay Spinuzzi, professor of rhetoric at the University of Texas at Austin, this is a trap. “Performing passion is the key to a successful pitch. This is a problem, because a nervous speaker will tend to be less successful in this performance,” he explains.