Crowdfunding? Three is the magic number
Justin Cash Co. isn’t looking to crowdfund. But if it were, I could do worse than refer to myself in the third person.
Researchers at ESSEC Business School and Ivey Business School have taken a look at some 9,000 campaigns. The use of third-person pronouns - that’s he/she/his/her, to those of you who skipped English lit - led to more donations: $620 more per campaign on average.
First-person pronouns - that’s I/me - on the other hand, had the opposite effect, reducing donations by an average of $682.
That might all sound a bit small fry for my normal City readers used to dealing in the tens of millions. But don’t doubt the effect of good old peer pressure on investor habits, whatever business you – or your client – is looking to raise cash for.
Indirect appeals have been found to be more effective than first-person wording across a multitude of studies. Simply put, investors tend to think they’re more credible if you don't try and ram your desperate dash for cash down their throat, and can get some other big dog to vouch for you instead.
“When we are uncertain of what to do, we tend to look to others for cues, thinking they are likely to have more knowledge than we do,” Dr. Amir Sepehri, a consumer psychologist at ESSEC Business School and one of the authors of the study writes. “This social influence lends credibility to a campaign, making people more likely to reach into their pockets.”
It’s what’s called social proof, and as it turns out, it doesn’t fall down sector lines for potential investors either. In the world of medical crowdfunding, for example, research suggests the third-person perspective is more effective at inspiring donations to male-patient fundraising campaigns. (Though strangely sticking with the first person seems to work better for female patients. Insert your own Theranos gag here).
And speaking of social clues, you’re in even more luck if you’ve already managed to raise money from an angel or venture capitalist before.
As the researchers put it, “prior financing certifies firm quality to investors and reduces information asymmetries in equity crowdfunding”.
Basically, people think others have vouched for you already, so they may as well stick a few quid in as well. Insert your own Archegos, Greensill, or Theranos gag here.
Take heed, readers with ambitions to scale. Have any readers come across any particularly good, bad or ugly examples of first-person phraseology that need to be expunged from future pitch decks? Answers on a postcard, if he/she pleases.