New research from the USC Brittingham Social Enterprise Lab and ESADE Business School investigates whether people are swayed more by emotional or cognitive appeals in requests for funding by social enterprises. Conventional wisdom is that having a compelling story is important for entrepreneurial success, and that contributors to socially-focused ventures are motivated mostly by their hearts.

Crowdfunding has gained popularity in social entrepreneurship and commercial entrepreneurship alike. It is a particularly powerful funding mechanism for the large number of entrepreneurs across the globe from marginalized communities who do not have access to traditional financing. Crowdfunding platforms also empower individuals who can lend or donate typically small amounts to engage in investment or philanthropic activities from which they may otherwise have been precluded.

In short, crowdfunding dynamics, characterized by inexperienced investors/donors, information asymmetry, and requests to broad audiences, are much different than traditional investment settings. How, then, should your crowdfunding campaign differ from an investment pitch?

The study by Naimi, Arenas, and Kickul examined 2,098 entrepreneurs in 55 countries who used Kiva (the largest crowdfunding platform in the world) to seek financing in 2019.

Here are the key takeaways:


1. Analytical language is positively associated with funding

The researchers were surprised to find a significant positive relationship between campaigns which used analytical language and the average amount of funding they received per day. Specifically, the study “suggests that in a prosocial crowdfunding setting a more analytical and logical way of constructing entrepreneur stories is more successful than a more personal and emotional way.”

One reason why this may be the case is that this study was conducted solely on Kiva, an environment in which the audience of prospective lenders is already inspired to “do good.” Thus, the researchers posit, entrepreneur stories in this context may need to emphasize cognitive appeals over emotional appeals so that lenders perceive that they are making a sound investment amongst a pool of other “do-gooder” options.


2. Appealing to negative emotions results in less funding

The study found a significant negative relationship between campaigns that utilize negative emotions and the average amount of funding received per day. The authors of the study note that this type of language deviates from standard entrepreneur stories in more commercial settings, which may create a sense in potential investors that the investment is unsound. Other researchers (Barberá-Tomás et al., 2019) note that negative emotions may attract attention to a cause, but may also create feelings of helplessness. This may undermine a campaign’s efforts.

While you may not want to use appeals to negative emotions in your crowdfunding campaign, this type of approach still has its place. Scholars have found that appeals to negative emotions (such as framing an issue as a crisis) are good motivators for collective action because they are directly connected with moral sensibilities (Goodwin et al., 2000; Snow & Soule, 2010).


3. Appealing to positive emotions has ambiguous results

Perhaps surprisingly, researchers found no significant relationship between language with appeals to positive emotions and the average amount of funding received per day. In other words, while this approach did not seem to attract more support, it also did not appear to be detrimental. As with the finding that cognitive appeals led to greater success, this may be dependent on context. Kiva attracts donors and lenders who are motivated by prosocial behavior as a baseline. However, in mixed settings, such as GoFundMe or Kickstarter, it may make sense for social entrepreneurs to distinguish themselves from more commercial ventures by appealing to positive emotions.

Notably, this study found that campaigns imbued with authenticity received greater funding. Thus, no matter the approach you take with your funding campaign, honesty and vulnerability should serve you well.

The authors of the study acknowledge that their research is limited by the fact that their data came solely from Kiva—a platform specific to prosocial crowdfunding—and that entrepreneurial storytelling may be perceived differently in other contexts. Additionally, while research distinguished between positive and negative emotions, it did not analyze how the intensity between different types of those emotions might influence results.

The bottom line for social entrepreneurs thinking about crowdfunding: the language you use matters! Strive for authenticity in all communication, and be aware of the context in which you’re seeking funding. If your audience is comprised mostly of individuals who are already bought into the concept of social enterprise, consider beefing up the cognitive appeal of your pitch by incorporating analytical language, and be wary of appealing to negative emotions when you’re asking folks to open their wallets.

Jill Kickul holds the Narayan Research Directorship in Social Entrepreneurship at USC’s Brittingham Social Enterprise Lab (BSEL). BSEL offers a Master of Science in Social Entrepreneurship that equips students with the business & entrepreneurial skills they need to make a social impact. Dr. Kickul also is a Professor of Clinical Entrepreneurship in the Lloyd Greif Center for Entrepreneurial Studies. She is the author of the bestselling social entrepreneurship textbook, Understanding Social Entrepreneurship. Her work on entrepreneurship education has been nationally recognized by Fortune and she was recently named ‘Educator of the Year’ by United States Association for Small Business and Entrepreneurship.

Jacqueline Orr is a Research Scholar affiliated with USC’s Lloyd Greif Center for Entrepreneurial Studies and BSEL. She is also a social impact consultant focused on revenue strategy, strategic planning, and organizational culture. She has been published in academic journals related to management and social entrepreneurship, and she has authored numerous business case studies distributed by Harvard Business Publishing and the Case Centre.

Asma Naimi is a PhD Candidate at ESADE Business School in Barcelona, Spain. Her research focuses on the role of social entrepreneurship in tackling large scale societal challenges that span borders, such as migration, poverty, inequality, and injustice. She studies the direct actions of social entrepreneurs to create impact and their communication practices to create awareness and mobilize support. She worked as a consultant in the field of international development, social entrepreneurship, and corporate social responsibility. Combining an eager, energetic, and entrepreneurial approach, she aims to create knowledge that makes a positive impact on society, building a bridge between academia and practice.

Daniel Arenas is Associate Professor of the Department of Society, Politics and Sustainability at ESADE Business School, Universitat Ramon Llull, where he is also a member of the Institute for Social Innovation. He holds a PhD and a MA from the Committee on Social Thought at the University of Chicago and a Diploma from the Program of Executive Development at ESADE. His research interests focus on communities and civil society organizations and how they interact with firms. His work has been publisehd in several academic journals such as Organization Studies, Journal of Business Ethics, Business & Society, and Organization & Environment.

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