Do Big Words Make a Big Difference in Funding Outcomes in Equity Crowdfunding?

Abstract

Venture descriptions are a pivotal means of communication on crowdfunding platforms. The general advice for entrepreneurs is to keep the language of venture descriptions short and simple. However, knowledge about the conditions under which language in crowdfunding communications impacts investment behavior is limited. Using data from 886 actual equity crowdfunding ventures, we show that descriptions with a higher proportion of complex words are positively associated with higher funding outcomes and greater campaign success. Further, using our investor level panel data comprising of 78,141 investments made by 26,965 unique investors we show that the effect of complex language on amount invested at any given investment occasion is particularly strong for less sophisticated investors. However, our results indicates that simultaneous use of complex language and innovative language in venture descriptions can attract more sophisticated investors. Our work contributes to the research on communication in crowdfunding by highlighting the significance of lexical complexity in influencing funding behaviour. We also provide actionable insights for entrepreneurs and recommend that the use of big words especially in tandem with innovative language.