Research Management

Experimental DecisionMaking Approach Attracts Funding

, by Claudio Todesco
Chiara Spina, in an ongoing study, stresses that the communication of the activities undertaken in the process of creating a new company should not be underestimated

When you are an early-stage entrepreneur, you should inform potential resource providers that you used an experimentation-based approach to decision-making. They may be more inclined to invest in your business. This is the preliminary result of an ongoing study by Chiara Spina, PhD Candidate at the Department of Management and Technology and Charles Williams, strategy scholar at Bocconi University. A growing number of entrepreneurs engage in experimentation activities in early-stage projects. Even though existing literature has focused on the benefits of this approach, the reaction of investors to the description of experimental activities has been overlooked. To investigate this issue, the authors performed text analysis on the descriptions of 54,377 projects launched and concluded on Kickstarter from March 2016 to February 2017. "We created a dictionary of words that signal experimental activities (experimental approach) or of the careful planning of each step of the process (planning approach) or none of the above," Chiara Spina says.

After accounting for the effect of a number of other variables (credentials, goal amount, length of funding period, number of Facebook friends, etc), they found that entrepreneurs that describe experimental activities are 41% more likely to achieve their funding goal than those who do not describe activities related to create their product/service. Entrepreneurs who described planning-related activities are also more likely to achieve funding than those who do not describe activities, but to a lesser extent (27% increase in likelihood). The effect is stronger for entrepreneurs at their first or second project.

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