Does it matter how you tell it? On how entrepreneurial storytelling affects the opportunity evaluations of early-stage investors

Abstract

This research examines whether and how entrepreneurial storytelling can influence early-stage investors' evaluations of new venture opportunities, by articulating and empirically testing a theoretical model that specifies a set of potential mechanisms by which this influence could be exerted. The theoretical model is tested with a field experiment involving 188 active business angel investors across different regions in the United States. Results from the experiment suggest that storytelling exerts a number of specific indirect effects on investors' evaluations, but that these effects operate in opposite directions, effectively cancelling each other out, so that the final outcome of the manipulation on investors' evaluative judgments is unobservable. The findings of the experiment thus suggest that entrepreneurial storytelling does affect investors' evaluative judgment, but that it does so in an inconsistent manner, which implies that entrepreneurs seeking to influence investors' evaluations by communicating their opportunities in the form of a story will have to find ways of capitalizing on the positive effects that storytelling seems to provide, while avoiding some of its pitfalls. The balance of this research shows that entrepreneurial stories can influence the evaluative judgments of early-stage investors, and opens the door for further research on the role of communication strategies in the entrepreneurial resource acquisition process.