A new study from the University of East Anglia (UEA) has shed light on what motivates investors to back start-ups through crowdfunding. Drawing on data from more than 1,000 successful campaigns hosted on the investment platform Seedrs, the researchers set out to identify which elements most strongly influence the amount of money raised. The findings point to a delicate balance of financial realism, persuasive language, and team composition that determines whether a campaign captures investor interest or fails to gain momentum. Their analysis suggests that success in crowdfunding is not random but built upon a combination of credible targets, transparent offers, and emotionally resonant messaging.

One of the most striking revelations is the existence of a £90,000 “sweet spot” for funding targets. According to the research, campaigns that aimed to raise around this amount were significantly more likely to succeed than those that set higher goals. Investors appeared to perceive £90,000 as an attainable figure that indicated both ambition and realism. In contrast, projects seeking substantially more were often viewed with scepticism, perhaps because such targets imply unrealistic expectations or heightened risk. This “sweet spot” acts as a psychological threshold, balancing investor enthusiasm with confidence in the entrepreneur’s ability to deliver results. By pitching within this range, start-ups position themselves as both promising and pragmatic.

The percentage of equity offered in return for investment emerged as another critical factor. Campaigns that offered a higher equity share attracted greater interest, whereas those with lower offers deterred investors. This finding runs counter to earlier research that suggested offering too much equity signals weakness or desperation. Professor Peter Moffatt, co-author of the study and Professor of Econometrics at UEA, explained that equity levels send an essential message about how much entrepreneurs value external investors. If a company offers too little equity, it might appear to undervalue the role of backers or suggest that the business’s self-assessment is overly inflated. In contrast, a higher equity percentage may signal transparency and partnership, giving investors the sense that their contribution is genuinely significant to the venture’s success.

Language was also shown to have a measurable effect on funding outcomes. The study found that pitches using terms such as “health,” “healthy,” and “organic” were notably more successful, whereas those using words like “entertainment” or “information” tended to perform poorly. This indicates that investors may be drawn to sectors they perceive as socially valuable, sustainable, or aligned with personal well-being. Words that evoke positive associations, ethical responsibility, or long-term societal benefits appear to create a deeper emotional connection. Such language not only conveys a business’s mission but also influences how trustworthy and forward-thinking it seems to potential backers. In essence, carefully chosen phrasing can subtly shift a campaign’s appeal from merely interesting to genuinely investable.

Team size proved to be another decisive factor. The researchers found that around 19 team members offered the best balance between expertise and manageability. Smaller teams often struggled with limited skills or capacity, while huge groups risked conflict and inefficiency. This optimum number suggests that diversity of talent and competence is attractive to investors, but only when combined with cohesion and clarity of leadership. A well-structured team signals reliability and preparedness, qualities that are essential when individuals are deciding where to place their money. Investors tend to view strong collaboration and balanced expertise as indicators of stability, making team composition a critical yet often overlooked component of crowdfunding success.

The study, conducted in collaboration with the University of Manchester and published in the Bulletin of Economic Research, analysed 1,189 campaigns. The researchers collected data on each campaign’s target amount, funds raised, equity offered, team size, and language choice in the one-paragraph project description. Using advanced econometric methods, they identified the variables most closely associated with successful fundraising outcomes. Their findings offer valuable insights for entrepreneurs seeking to refine their crowdfunding strategies. By setting realistic financial goals, offering investors a meaningful stake, using persuasive yet authentic language, and building balanced teams, start-ups can significantly improve their chances of securing investment. The study underscores that while innovation remains essential, clarity, strategy, and communication are equally powerful tools in transforming an idea into a fully funded enterprise.

More information: Xuerui Ma et al, Determinants of Amount Raised in Equity Crowdfunding Campaigns: An Application of Truncated Regression, Bulletin of Economic Research. DOI: 10.1111/boer.70015

Journal information: Bulletin of Economic Research Provided by University of East Anglia