For entrepreneurs, securing funds can be one of the most important – and often one of the most challenging – parts of starting a new business. Whether it’s a business plan presentation to a group of investors or an online crowdfunding effort, entrepreneurs often must navigate a series of pitches to obtain the capital needed to launch their business. A recent University of Missouri study shows that humor can be a compelling advantage in entrepreneurial pitches.
Scott Seyrek, the author of the study, examined nearly 200 responses to evaluate the role humor plays in entrepreneurial pitches. The study found that humor, argument quality and investor regulatory focus all interacted to predict perceptions of the pitch and individuals’ likelihood of investing in the venture.
When the pitch included a cogent argument, humor was appreciated. However, when a pitch’s argument was weak, humor actually hurt perceptions of the presentation.
Seyrek writes: “The pitch is a high-stakes activity, and entrepreneurs attempt to shape their pitch in such a way that it not only communicates vital information about the business itself, but captures the attention, imagination, commitment, and cash of investors.”
Seyrek’s study used undergraduate college students’ reactions to video recordings of pitches. The videos were manipulated to reflect a three-way interaction between humor, argument strength and investors’ motivational orientations. Whether investors wanted to prevent financial risk (Preventors) or focus on other factors (Promoters) largely influenced how they would receive humor used in pitches.
Prevention-focused investors were insensitive to both humor and argument strength. Conversely, humor made investors with promotion-focused orientations more cognitively flexible – they were better able to assess the strengths and weaknesses of the pitch’s central argument. The study found that the use of humor in pitches functioned similarly to the use of passion; both intangible qualities have varying effects on investors that relied on the investor’s profile and personality.
Seyrek’s study builds upon extant literature to suggest best practices for entrepreneurs: prepare, build a strong argument and use humor.
- Humor helps when it is coupled with a strong argument.
- Entrepreneurs should focus on communicating why their business idea is sound before using humor in a pitch.
- Pitch outcomes can be influenced by many intangibles such as humor, passion and positivity.