Posts tagged with "economics"

Make a passionate pitch—if you want investors

The brains of investors are wired to pay closer attention to entrepreneurs who pitch with passion, according to new research.

One would expect that entrepreneurs who pitch their startup ideas with passion are more apt to entice investors. Now there’s scientific proof the two are connected: enthusiasm and financial backing. According to new research from Case Western Reserve University, the brains of potential investors are wired to pay closer attention to entrepreneurs who pitch with passion.

Researchers examined investors’ neural responses to entrepreneurs’ pitches, conducting a randomized experiment that explored the response of investors’ brains using functional Magnetic Resonance Imaging

(fMRI)—finding a causal relationship between passion of the pitcher and interest from investors.

“No one has ever invested in a startup they ignored,” said Scott Shane, the A. Malachi Mixon III Professor of Entrepreneurial Studies in the Weatherhead School of Management at Case Western Reserve.

“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,” said Shane, lead author of the paper, published in the Journal of Business Venturing. By showing such energy in pitching their business ideas, entrepreneurs can considerably increase neural engagement in potential investors—increasing the odds these financiers will support a new, untested venture by having strong, measurable effects on their decision-making.

“Most of time investors just say ‘no,’” said Shane. “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,” he said. “We believe our data makes a strong argument that displays of passion trigger heightened engagement that, in turn, makes investors more likely to write a check.”

The experiment

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 stimulus (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.

“More engaged brains are more likely to meaningfully evaluate pitches—and not play on their phones or think about lunch which should result in more favorable investor assessments,” said Shane.

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.

The practice of passion

The findings offer strong implications for the practice of entrepreneurship. “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.”

Each year, hundreds of thousands of early-stage entrepreneurs, who often lack established track records, offer pitches—widely recognized as the gateway to investor funding—to financiers across the globe. The study focused on Informal investors—referred to as “family, friends and foolhardy strangers” by the Global Entrepreneurship Monitor who account for most startup investments, investing $1 trillion globally between 2012-2015, according to the organization.

The study was co-authored by David Clingingsmith, an associate professor of economics at the Weatherhead School. Will Drover of the University of Oklahoma, and Moran Cerf of Northwestern University also co-authored the paper.

Save Journalism Project Launches To Protect Our Press From Big Tech

BuzzFeed Reports on Recently Laid Off Journalists Serving  As Spox For New Campaign To Save Journalism From Monopolistic Power of Big Tech Companies

Today, BuzzFeed reports on the Save Journalism Project that’s launching to raise awareness and engagement about the critical need to save journalism as it faces an existential threat—the monopolistic power of big tech companies like Google, Facebook, and Apple destroying the economic model of the entire journalism industry, whether its traditional circulation newspapers or digital news outlets. At the same time, Google and Facebook have made acquisition after acquisition, gaining a monopolistic position that lets them dominate the digital advertising marketplace and distribute massive amounts of content from news publishers on their platforms without paying to produce the content. Just now are Facebook, Google, and other tech giants facing federal government and Congressional antitrust scrutiny.

Two recently laid off reporters will serve as spokespeople for the Save Journalism Project, Laura Bassett  and John StantonLearn More and Join the Fight at SaveJournalism.org and@SaveTheNews.

BuzzFeed: These Reporters Lost Their Jobs. Now They’re Fighting Back Against Big Tech.

“John Stanton and Laura Bassett are warning about what they believe the tech industry is doing to journalism, as thousands have lost their jobs this year alone.

By Rosie Gray”

Two prominent reporters who were recently laid off from digital media outlets are forming a new advocacy group formed to raise awareness about big tech’s impact on the journalism industry.

John Stanton, a longtime congressional correspondent and former BuzzFeed News Washington bureau chief, and Laura Bassett, a former culture and political reporter for nearly 10 years at the Huffington Post, have teamed up to launch a new initiative called the Save Journalism Project. The two have first-hand experience with the troubled state of the news industry: Stanton was laid off from BuzzFeed News during a round of layoffs that affected 200 people company-wide this winter and spurred a unionization drive among the news staff. Bassett lost her job in similar fashion in January after Huffington Post laid off 20 employees as part of larger cuts at its parent company, Verizon Media.

This year has been one of the worst in recent memory for journalism jobs. Across the industry, thousands have lost their jobs: from BuzzFeed News, Vice, CNN, and others across the country at local publications. Media organizations have been imperiled by crashing advertising revenues as Facebook and Google vacuum up available ad dollars.

Their new project will be set up as a nonprofit, according to Eddie Vale, a Democratic consultant whose firm is providing the man-power to launch the effort. Vale pitched Bassett on the idea, and the two of them brought in Stanton. Vale said initial funding had been secured from “someone who doesn’t want to be public so Google and Facebook don’t go after them,” and the group plans to continue to fundraise. So far, the pair have co-authored testimony given to the Senate Judiciary Committee highlighting the tech giants’ impact on the news industry — “since being laid off, we’ve made it our mission to understand how the digital marketplace works and how Big Tech is killing the journalism industry,” they wrote — flown a plane above Google’s I/O conference, and authored op-eds.

A key part of their goal is to get journalists, who aren’t known for showing a keen interest in the business side of their publications or for engaging in advocacy themselves, to take an active role in defending the future of their jobs. In an interview, Stanton said they were “trying to educate the public and members of Congress and also start encouraging our colleagues to speak up.”

“Reporters are not generally super interested in speaking about their own problems and about things that affect them directly because they feel like it becomes a conflict of interest, and in certain ways that’s true,” Stanton said. “But when the future of the free press is being pretty seriously endangered by something, I think it’s incumbent upon us to stand up for ourselves.”

Like many reporters, Bassett said she had “never really had to pay attention to the financial side of journalism.”

But “after getting laid off, I started to become really interested in why all of these amazing news publishers were sort of going under, having to lay off staff, why we were losing local newspapers. It’s a tragedy, it’s really bad for democracy.”

Their effort comes at a time of increased scrutiny of the tech industry on the part of the federal government as well as Congress as public concern mounts over repeated privacy scandals, technology companies’ role in spreading misinformation, and their dominance over certain industries. The Justice Department and the Federal Trade Commission reportedly made a deal to divide potential antitrust investigations between them; Apple and Google will fall under the purview of the DOJ, while the FTC took Facebook and Amazon. The House Judiciary Committee announced it would “conduct a top-to-bottom review of the market power held by giant tech platforms.”

The Save Journalism Project’s founders are hoping to steer the public conversation around the negative effects of Big Tech towards its impact on journalism.

Stanton, who lives in New Orleans, mentioned examples like that city’s local paper, the Times-Picayune, which laid off its entire staff last month. Around the country, Stanton said, “local reporters are so overtaxed. They’re doing as good a job as they can but there’s not enough of them.”

At the moment, Stanton and Bassett are more focused on warning the public and the industry about the issue than on proposing solutions.

“I do think that everyone is starting to see a need to break up and regulate these companies or something along those lines,” Bassett said. “And with regards to how they’re going to make journalism viable again, I don’t frankly know…I think right now we’re starting with just getting this conversation out into the public and making people aware of exactly what’s going on. I do hope at some point we graduate into saying, ‘here’s a list of policy proposals, here’s exactly what needs to happen.'”

Stanton and Bassett plan to interview elected officials, candidates and colleagues in the media about the industry’s crisis, and started with conducting on-camera interviews with Reps. Mark DeSaulnier and Ruben Gallego. They plan to circulate a letter with which media companies can sign on to their cause. And their first official event will be at the annual Congressional Baseball Game, where they plan to distribute a physical newspaper laying out the problems on their agenda.

“The DC press corps is a really powerful constituency within our industry,” Stanton said. “If we can get our colleagues [there] to start talking about this it will help more broadly.”