The research study describes cognitively complex language as language that includes nuance, distinction and contrast, expressed through words such as “might”, “potentially”, “however”, “other than”, “harder”, “better” or “more”. With the aid of computer-assisted analysis, the researchers assessed the language used in 547 actual start-up pitches provided during the prestigious “Startup Battleground” competitions at TechCrunch Disrupt occasions, which have actually led to companies currently receiving over 8.8 billion dollars in financial investments. They also conducted a randomized experiment with 240 experts that simulated their decision-making process in pitch situations. The decision-makers were offered short text vignettes that reproduced a start-up pitch and whose content was always the exact same, while the business owners’ language varied, with some using a low level of cognitively complex language and others a high one. The research study individuals were then asked to rank the probability of their investing in the start-up.
Advanced language demonstrates competence
The result was that start-up entrepreneurs who used cognitively more intricate language had the ability to secure much more capital compared to their rivals. Usually, a boost in linguistic complexity by one basic deviation leads to an increase in financing of 7.25 percent, or approximately 125,000 dollars in additional investment. Those who utilize differentiated language not only distinguish themselves from the rest but are also perceived by financiers as more proficient in handling complicated scenarios, which in turn influences the latter’s funding decisions. Start-up entrepreneurs from an elite university especially benefit from utilizing cognitively intricate language, as their academic background lends them additional reliability. At an extremely high level, however, the positive effects of language use decrease. Excessive linguistic complexity can make it challenging for investors to process information or create the impression that the person providing the pitch doubts.
“The study shows how essential it is to surpass all too simplistic guidance when it concerns entrepreneurial communication,” states Lorenz Graf-Vlachy, Professor for Strategic Management and Leadership at TU Dortmund University and one of the authors of the research study. “Investors value business owners with the ability to believe seriously and handle intricacies, as these are very important qualities for mastering the obstacles involved in establishing an effective company.” One start-up whose owners provided pitch discussions that were particularly cognitively intricate and had the ability to bring in extremely high levels of investment is the fintech business N26: “The start-up raised over 10 million dollars in the twelve months following its pitch,” reports Graf-Vlachy.
Original paper
Contact for queries: