(Press-News.org) A new study led by the University of East Anglia (UEA) reveals what drives investors to put their money behind business start-ups.
Researchers analysed more than a thousand successful crowdfunding campaigns on the platform Seedrs.
They found that setting a £90K “sweet spot” target, having around 19 team members, and using certain phrases including “health” and “organic” in campaign pitches all helped attract investors.
Offering a high equity percentage in return for investment was also found to be crucial – with low equity ratios putting investors off.
The researchers hope their work could help entrepreneurs fine-tune their campaigns, by choosing the right financial targets, crafting compelling language, and building strong teams.
The study, which also involved the University of Manchester, is published today in the journal Bulletin of Economic Research.
Co-author Peter Moffatt, Professor of Econometrics at UEA, said: “We were attempting to identify the features of a campaign that attract investors.
“We find that the optimal target amount, the sweet spot, for entrepreneurs to raise is around £90,000. It seems that investors are happy to contribute to projects with targets up to £90,000 but consider targets above that to be too high.”
Prof Moffatt added: “The percentage of equity offered is also a really good measure of the extent to which the entrepreneur is relying on the external investors. Our result of a high equity percentage contradicts findings from previous studies, which have found a negative effect related to this.
“We suggest that if the percentage of equity offered is very low, this might be perceived as a signal that external investors are not regarded as important to the success of the project, and this might put investors off.
“Investors want to feel that they are making an important contribution. Another possibility is that a low equity ratio signals that the company’s valuation is exaggerated, and this might make investors wary.”
The researchers used data on 1,189 equity crowdfunding campaigns. For each they collected information on the target amount, the amount raised, the percentage of equity offered, the number of team members and the presence of particular words in the one-paragraph project pitch.
They then identified the features of a campaign that bring about an increase in funds raised.
They found those pitches containing the words “health/healthy” and “organic” tend to be more successful, while those containing the words “entertainment” and “information” appear to be less successful.
On the optimal number of team members, the researchers suggest that starting a business with a small team can be difficult and cumbersome because of the lack of competences and capacity constraints. However, the larger the management team of the start-up becomes, the more likely it is that disputes among its members will happen.
‘Determinants of Amount Raised in Equity Crowdfunding Campaigns; an Application of Truncated Regression’, Xuerui Ma, Peter Moffatt and Simon Peters, is published in the Bulletin of Economic Research on Wednesday November 12.
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Experts find £90K “sweet spot” for crowdfunding success
2025-11-12
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