Demonstrative passion is paramount to earning new venture investment via crowdfunding

Suresh Kotha

When trying to raise startup capital via online crowdfunding sites such as Kickstarter and Indiegogo, entrepreneurs need to pitch with palpable passion.

That’s the conclusion of a study by Suresh Kotha and Xiao-Ping Chen of the University of Washington Foster School of Business.

Their examination of entrepreneurial crowdfunding campaigns reveals that overt displays of passion in an online video presentation dramatically increase the odds that viewers will dedicate their own money to the development of a new product or venture.

Perhaps more importantly, a passionate pitch also increases the likelihood that investors will forward to friends. Add an innovative product and the effect is even greater.

“Displaying passion in a crowdfunding video increases the amount of enthusiasm for the project that viewers experience,” says Kotha, a professor of management and the Olesen/Battelle Excellence Chair in Entrepreneurship at Foster. “This prompts them to contribute financially and to share campaign information via social media channels, further facilitating campaign success.”

Small investments add up

Xiao Ping Chen

Xiao-Ping Chen

Crowdfunding has democratized the process of seed financing for early stage business startups and product launches. A populist alternative to big-money venture capitalists and angel investors, crowdfunding allows entrepreneurs to raise startup cash in modest amounts from amateur investors and enthusiasts, harnessing the viral capability of social media.

Financing may come in small denominations, but it’s starting to add up. By one estimate, money raised from entrepreneurial crowdfunding has already surpassed venture capital financing—which pours an average of $34 billion into startups annually.

But while a great deal of research has been devoted to understanding the vested relationship between entrepreneurs and large individual and corporate investors, the dynamics of crowdfunding have remained unexplored. What motivates these casual investors to fuel innovation for little in return but early access to a promising new product? What does it take to convince them to back a project?

To address these fundamental questions, Kotha and Chen, the Philip M. Condit Endowed Chair in Business Administration at Foster, collaborated with former Foster doctoral student Junchao (Jason) Li, now an assistant professor of management at Tulane University, and Greg Fisher, an assistant professor of entrepreneurship at Indiana University.


The researchers analyzed survey and archival data from hundreds of product fundraising campaigns mounted on the world’s most-popular crowdfunding platforms: Indiegogo and Kickstarter. From MBA and undergraduate student critiques, they established which new venture campaigns were perceived as passionate. Matching these reviews with campaign outcomes—number of contributors, social media shares, total funds raised relative to the stated goal—they noted a clear preference for projects pitched with greater enthusiasm, excitement and intensity.

In a follow-on laboratory study, an actor delivered four different crowdfunding pitches, each demonstrating a different combination of clearly delineated levels of passion and product innovativeness. The four conditions were: low passion, low novelty; low passion, high novelty; high passion, low novelty; and high passion, high novelty.

As in the first two studies, participants were far more likely to contribute to the crowdfunding campaigns delivered with visible passion—whether or not that passion was coupled with a novel product. And they also were more apt to share the passionate pitches with their friends via Twitter, Facebook and other social media platforms.

While innovation was not the most important condition of the crowdfunding campaign, it enhanced the value of a passionate presentation.

Necessary and sufficient

This new insight on the power of passion is at odds with a previous study by Kotha and Chen which found that perceived passion is necessary but not sufficient to convince venture capital and angel investors—professionals with both sophisticated analytical skills and significant vested interest.

With crowdfunding, it appears that passion is both necessary and sufficient. The reason, Kotha says, is that the casual investors of crowdfunding appeals have less expertise to discern a project’s quality or market potential. And they have little vested interest apart from insider access to a cool new product.

“When you don’t have expertise to evaluate a venture like a professional,” Kotha says, “you look for simple cues from the entrepreneur: authority, passion.”

The other big difference is social. Professional investors are famously protective, whereas crowdfunding thrives on word of mouth via social media.

Passion and prudence

Kotha says that the paper’s findings bear a different message for both sides of the crowdfunding equation.

Entrepreneurs need to play to the crowd. “They should invest time and effort in developing a campaign video that clearly demonstrates their passion for the project,” he says. “It should contain an upbeat and positive voice and bold hand gestures.”

Potential investors need to take care not to be swayed by passion alone: “Avoid impulsively contributing to a campaign without first objectively considering the project rewards, the ability of the entrepreneur to deliver on promises, and whether the risks are worthwhile.”

This caution, Kotha adds, is generalizable to many different arenas, including sports, education, religion and politics.

“When we lack the expertise to make an informed judgment, we often look for passion,” he says. “But we should not overlook other substantial factors.”

Catching Fire and Spreading It: A Glimpse into Displayed Entrepreneurial Passion in Crowdfunding Campaigns” was published in the July 2017 Journal of Applied Psychology.