Linguistic understandability, signal observability, funding opportunities, and crowdfunding campaigns

Abstract

This study examines the impact of readability and understandability of the narratives on the signal receiver's acceptance of the signal which, in turn, affects a potential funder's decision, and hence the funding outcomes. Lexicon-related indicators and grammar-related indicators are applied to analyze 267,688 crowdfunding projects from the crowdfunding platform Indiegogo. Entrepreneurs must apply the right mix of lexicon- and grammar-related indicators to improve the online narrative's readability and understandability so as to send the right signals to attract project funders. Our results suggest that most of the indicators promote successful funding. Some indicators show a curvilinear, U-shape or inverted U-shape influence. The lexicon-related indicators rank higher in importance than the grammar-related indicators, and the number of difficult words ranks first among the indicators. This study links signal observability, linguistic cues, and funding success, and provides theoretical and practical implications on the understanding of signaling theory and narratives.