When pitching to investors, it’s good to be enthusiastic about your business idea, but too much enthusiasm could hurt your chances of being funded, according to new research led by Georgia Institute of Technology researchers.
“The findings suggest that investors may interpret prolonged periods of high enthusiasm as over-optimistic,” said Dong Liu, an associate professor in Georgia Tech’s Scheller College of Business, in a statement about the findings. “Over-optimistic entrepreneurs are thought to make irrational decisions and overestimate their products’ profitability.”
To conduct the study, researchers used artificial intelligence and facial expression recognition software to analyze video pitches for close to 1,500 business funding proposals on the crowdfunding website Kickstarter. They studied both the intensity of enthusiasm and the duration of periods of higher enthusiasm, which they called periods of “peak joy.”
“Although a higher level of peak joy displayed by entrepreneurs during their pitches leads to better funding performance over time, prolonged display of peak joy seemed to undermine funding performance” Liu said. “Another possible interpretation is that investors may believe the entrepreneur is acting and the pitch is manipulative. Maybe they feel the entrepreneur is using his or her excitement to manipulate the investors’ perceptions in hopes of increasing the odds of getting funding.”
The researchers found that, after controlling for differences in the products and business ideas, more enthusiastic pitches were likely to receive funding, but the likelihood of funding trended downward as the period of peak joy went for too long.
Another finding in the research: the best place to exhibit peak joy is at the beginning and near the end of a pitch.
The study, “Can Joy Buy You Money? The Impact of the Strength, Duration, and Phases of an Entrepreneur’s Peak Displayed Joy on Funding Performance” was published April 8 in the Academy of Management Journal.