The randomised experiment, published in the Journal of Business Venturing, explored investors' responses to entrepreneurs' pitches using functional Magnetic Resonance Imaging (fMRI) to measure investors' brain activity to find a causal relationship between passion of the pitcher and interest from investors.
They found that entrepreneurs showing such energy in pitching their business ideas can considerably increase neural engagement in potential investors with informal investor interest increasing by 39%.
Lead author Scott Shane, the A. Malachi Mixon III Professor of Entrepreneurial Studies at the Weatherhead School of Management at Case Western Reserve, explains: "No one has ever invested in a startup they ignored.
"Founder passion is essential to establishing investor attention, and our study demonstrates measurable neural effects that offer a biological explanation for their tendency to react positively to enthusiasm and emotion of entrepreneurs."
"Most of time investors just say 'no'. In fact, the vast majority of entrepreneurs never receive a dime from external investors.
"Entrepreneurs should know: More engaged brains are more likely to meaningfully evaluate pitches,"
The experiment
The study focused on 'informal investors' who account for most startup investments, investing $1 trillion globally between 2012-2015, according to the report.
Videos of pitches, identical in content but different in delivery, were randomly assigned to investors inside an fMRI machine.
Depending on the passion-level of the pitch, investors' brains reacted differently: Heightened displays of passion increased investor fixation on the pitch to override distractions and demonstrate a causal effect of displayed passion on investor interest.
Investors randomly assigned a pitch with high founder passion resulted in informal investor interest increasing by 26%, relative to the same pitch delivered with low passion;
Data from fMRIs showed investor neural responses to entrepreneurs' high-passion pitches increased investor neural engagement by 39% over lower founder passion.
While it's possible that other mechanisms may be present in the brains of investors, such as inferring from passion that entrepreneurs may be more capable or competent, the experiment showed that passion is a key mechanism because it causes investors to pay attention, said Shane.
"Pitching with enthusiasm and passion--these are skills that can be taught," said Shane. "Flat, unenthusiastic pitches are the enemy of attracting investor attention and to succeeding in a competitive, cutthroat environment."
Source: Journal of Business Venturing
Authors: Scott. S. et al
"Founder passion, neural engagement and informal investor interest in startup pitches: An fMRI study"