With the COVID-19 pandemic causing a significant slowdown of economic activity, entrepreneurs and startups are having problems securing the critical financing they need. As banks review their lending practices and government assistance programmes are stretched to capacity, startups may have to look beyond more conventional channels and explore other avenues such as crowdfunding to attain much-needed capital.
The crowdfunding scene is primed to help startups during this challenging time. While the quantity of live projects on Kickstarter is down about 25 per cent year on year, support for Kickstarter crowdfunding campaigns and their success rate are consistent with pre-pandemic levels.
During the pandemic’s emergence last year, equity crowdfunding platform Wefunder saw investor volume increase 35 per cent in the first quarter of 2020, with crowdfunding investments doubling to US$63 million through November (up from US$28.2 million the year prior).
Government bodies also recognise crowdfunding’s potential to help take up the slack; the SEC recently updated crowdfunding guidelines so that companies can now raise US$5 million per year using equity crowdfunding (vs. the previous limit of US$1.07 million), while the EU harmonised crowdfunding rules so that issuers can raise up to EUR5 million across all EU member states.
With crowdfunding serving as a lifeline for startups and small businesses, how can you attract backers and leverage the power of the online community? What will make your project stand out from the others vying for investment?
The answer lies in how trustworthy your startup is perceived, especially when funders don’t have much else to go on. Our new study explores how a certain type of trustworthiness – based solely on an entrepreneur’s facial features – can play a role in crowdfunding success.
Based on previous research findings, certain facial features such as roundness of the face and wide chin are likely to be perceived as trustworthy.
Also Read: Bambooloo raises US$250K+ via equity crowdfunding to expand its plastic-free home goods into UK
Building on this premise, my team and I constructed a comprehensive facial trustworthiness index that uses machine learning-based facial detection techniques. We ran photos of entrepreneurs for technology-related projects on Kickstarter through the index to uncover these most applicable findings:
The more you look the part, the more likely you are to get the funds
Our study found that entrepreneurs who look more trustworthy are more likely to have their campaigns funded. Positive facial trustworthiness impacts both quality and quantity – not only do “more trustworthy” appearing entrepreneurs receive more in pledged amounts, they attract more funders overall.
Trust is more important than attractiveness
Facial trustworthiness plays a more important role in determining the crowdfunding success of female entrepreneurs versus their male counterparts. While some may argue that perceived attractiveness and not trustworthiness– is playing a role behind-the-scenes, we tested for this and found that facial attractiveness didn’t significantly impact crowdfunding success.
A trustworthy-looking face helps funders feel better about the overall project
Facial trustworthiness does really alleviate funder concerns about crowdfunding uncertainty. These perceptions can be key to the decision-making process in an investment environment where other project-related information is limited.
Facial trustworthiness is a thing, but some common truths remain
Projects with lower fund-raising goals and longer durations are more likely to be successfully funded, and entrepreneurs who include a video presentation have higher success rates, as this signals both high quality and preparedness– elements that build trust.
While it may seem superficial to have your face sway potential crowd funders, the study shows that the success of Kickstarter crowdfunding efforts don’t always have to do with the quality of a project, people need to be won over with trust. In order to win over a funder’s support, you really may have less than 34 milliseconds– the shortest amount of time needed for someone to judge a person’s trustworthiness based on their face.
By simply looking the part of a trustworthy entrepreneur, people may be willing to overlook shortfalls that currently exist elsewhere in your project, so put your most trustworthy-looking face forward to seal the deal!
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Image credit: Sharon McCutcheon on Unsplash
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