Emotions in New Venture teams (NVTs): The Valuation Effects of NVTs‘ Affects in Crowdfunded Projects

Abstract

This study relates New Venture Teams’ (NVTs’) emotional displays to firm valuations in blockchain-based crowdfunding (i.e., Initial Coin Offerings, ICOs). Tracking 2,520 NVT members in 165 ventures over the course of their crowdfunding campaigns, I exploit the neurological link between the central nervous system and facial muscle contraction-relaxation patterns to identify NVT members’ affective traits from their facial expressions. The results suggest that the level of NVTs’ negative affects is associated with lower ICO firm valuations, while within-NVT “emotional diversity” has a value-increasing effect. Intuitively, negative affects are associated with traits, such as relative risk intolerance and analytical perfectionism, which may be prejudicial in dynamic entrepreneurial markets, but could be valuable if balanced by opposite traits in emotionally diverse NVTs. The results for positive affects are diametrically opposed, albeit non-significant. Overall, this study extends the focus of the affective entrepreneurship literature to the NVT level, introduces the concept of emotional diversity, and explores the role of emotions in entrepreneurial finance.