Wise Crowds? Crowdfunding Success, Text Complexity, and External Quality Signals

Abstract

Language use in crowdfunding contexts is a growing area of research interest due to the primacy of the written word in crowdfunding pitches on platforms such as Kickstarter. Language complexity in particular has received significant attention as a driver of crowdfunding outcomes, with mixed results. Arguments in the extant literature that complex language serves as a potential quality signal to naïve investors, while compelling, have not considered how this mechanism might function in the presence of other more explicit external signals of venture quality. This study draws on prior studies that imply a general bias against complex language amongst non-technical audiences alongside the “wisdom of crowds” literature in management to build theory about crowdfunding investors’ language preferences and how these preferences may shift in the presence of external signals of venture quality. I hypothesize and find that crowdfunders show less interest in pitches which use complex language. I also disentangle the interaction between language complexity and external quality signals using both archival and experimental methods, finding that when holding constant the actual quality of the underlying venture, crowdfunders prefer simple language paired with external signals of quality over complex language, with or without external signals of quality.