One of the key challenges for start-ups and entrepreneurs who are not privileged enough to already have large sums of money at their disposal, is acquiring the vital funds needed to transform their ideas into reality. There are many ways to attempt to obtain this funding such as personal connections, crowdfunding or government start-up schemes, what these methods have in common is they all involve trying to persuade others that your product or service is worth investing in.
The typical way in which an entrepreneur will attempt to persuade potential investors to provide financial backing is through investment pitches. Entrepreneurs present their business plans, products and/or services to potential investors and subsequently attempt to convince them that they are worth investing in. Being able to deliver a successful pitch can be an extremely daunting challenge for many budding entrepreneurs, and is often a make or break moment for their young ventures.
Though many entrepreneurs successfully obtain the vital funding needed to launch their ventures, it is difficult to pinpoint a direct reason as to why investors are so convinced by these pitches and agree to back a venture. Is it because of the quality of the product itself? The entrepreneur’s attention to detail in their business plan? Or, the charisma and passion of the entrepreneur? It is hard to determine whether there is one deciding factor that influences an investor’s decision, or whether it is numerous factors that do so, making it difficult for an entrepreneur to know exactly how to pitch.
In my recent research, with colleagues from Rotterdam School of Management, Erasmus University (RSM), and Alliance Manchester Business School, we decided to look into entrepreneur’s investment pitches to determine what factors make a successful pitch, and whether or not the actions and gestures of an entrepreneur in these pitches had just as much of an influence over potential investors as the actual content and language used.
To do so, we first studied entrepreneurs as they pitched to potential investors at a regional technology investment forum in the north of England. Tech entrepreneurs can face particular challenges when communicating their ideas to investors due to the complexity of their business products and ideas.
In this field study we observed significant variations in how these entrepreneurs used speech and gestures, identifying four main strategies that entrepreneurs used when pitching;
- A literal approach – a technical description that involves minimal figurative speech and little use of gestures
- A rhetorical approach – using considerable figurative speech to explain the venture but with little gesturing
- A demonstrative approach – using minimal figurative speech but relying on an animated delivery style through the repetitive use of gestures
- An integrative approach – using a high level of both figurative speech and gestures
In a second experimental study we video-recorded an actor acting out each of the above four approaches to pitching. We then showed one of these pre-recorded pitches to experienced investors. Each investor saw only one video, wasn’t aware there were any other variations of the pitch and believed this was a real-life pitch. We found when the actor-entrepreneur included animative and demonstrable gestures, which helped to portray the venture ideas, this triggered mental imagery in the minds of potential investors about how the product or service could be used, and ultimately made the business propositions clearer and more appealing to these investors.
In fact, our research found that using an ‘integrative’ approach, with clear and easy to understand gestures made the likelihood of an investor backing their business increase by an average of 12%.
So, what does this mean for entrepreneurs?
Entrepreneurs typically only have a short amount of time to present their long-term business plans and their products and/or services to potential investors. For most entrepreneurs, these investment pitches are a make or break moment for their ventures and can determine the future of their companies.
Therefore, it is vital that entrepreneurs understand how to maximise the effectiveness of these pitches, to ensure they are as convincing, engaging and clear as possible for potential investors. By understanding which elements of their presentations will appeal most to potential investors, such as including demonstrational gestures to illustrate the more complicated parts of their business proposition and emphasise key points, it is more likely that entrepreneurs will gain the investment they need for their young ventures.
I am professor of entrepreneurship and organization. My research explores how language and other cultural resources are used by entrepreneurs to create meaning and develop legitimacy. This includes non-verbal resources (body, dress, space) used as part of behavioural displays and interactions. I also have an interest in socially situated and embodied cognition in the entrepreneurial context.
- Clarke J., Cornelissen J. P., Healey M. (2018). Actions Speak Louder than Words : How Figurative Language and Gesturing in Entrepreneurial Pitches Influences Investment Judgments. Academy of Management Journal, forthcoming. DOI: 10.5465/amj.2016.1008.
Read abstract online