Why do video pitches matter in crowdfunding?

Abstract

Recent research finds that whether or not ventures publish video pitches during crowdfunding campaigns affects their funding success. Little is known, however, about how and why video pitches help startups achieve higher valuations. To close this gap, we analyze metrics and the content of video pitches published along blockchain-based crowdfunding campaigns (a.k.a. token offerings, initial coin offerings, or ICOs). We confirm that the publication of video pitches increases the funding amount, and present novel evidence on the mechanisms behind this finding. First, the longer the video, the larger its valuation effect. Second, it is the information content that matters in videos, while non-informational content (e.g., music) has no effect. Third, information conveyed in videos vis-à-vis other channels (e.g., white papers) act as informational substitutes. Fourth, investors react positively to buzz words in videos, and this effect is even more pronounced when there are many competing projects. Overall, our results suggest that videos are an important source of information for ICO investors, and investors’ limited attention makes videos (and their content, especially buzzwords) more important in “hot” markets.