Two Studies on the Importance of Founding Narratives to Entrepreneurial Pitch Success

By Richard Gruss & Zachary A. Collier. They both teach at Radford University.

"Abstract

 

One crucial function of the entrepreneurial pitch is to alleviate investor uncertainty about committing funds to a startup in the early stages of development. New ventures rarely have sufficient hard data to substantiate their future success quantitatively, so investors often need a qualitative reason for putting their faith in the entrepreneur. Storytelling, as a powerful and time-honored method of transforming the intangible into the tangible, can go a long way toward establishing legitimacy and alleviating uncertainty. In this research, we empirically test whether the inclusion of an origin story in an entrepreneurial pitch significantly increases the probability of obtaining funding. This research consists of two studies. In the first study, we analyzed 486 pitches from six seasons of ABC’s Shark Tank and observed a significant relationship between the presence of a founder story and funding success. In the second study, we confirmed causality via a randomized controlled experiment. This finding has implications for entrepreneurs, in that it encourages them to concentrate on the narrative they are telling in their pitches. It also has implications for investors, in that it invites them to reflect on how important investment decisions might be swayed by presentational aspect of pitches."