Do Early Words from New Ventures Predict Fundraising? A Comparative View of Social Media Narratives
Authors: Havakhor, Taha; Golmohammadi, Alireza; Sabherwal, Rajiv; Gauri, Dinesh
Journal: MIS Quarterly (2023)
<jats:p>Online equity markets have significantly changed the dynamics of connecting angels and individual equity investors to new ventures that seek early-stage capital. However, for those early-stage investors, information pointing to the success of business-to-business (B2B) new ventures (B2BNVs) is scattered and disconnected. This paper focuses on social media narratives (SMNs) as a source of insight for such investors and proposes that predicting a B2BNV’s likelihood of success requires a comparative view, i.e., a comparison of its SMNs with those of its competitors and customers. We expect that higher (lower) lingual similarity between the SMNs of an early-stage B2BNV and those of its prospective customers (competitors) predict its success. Using a longitudinal panel of 574 B2BNVs resulting in more than 2,700 venture-round observations, we find that a comparative view of a venture’s SMNs can give early-stage investors reliable predictions about the B2BNV’s ability to manage its market presence and its success in later stages. Our models show that a comparative view of SMNs increases the accuracy of predicting a B2BNV’s later-stage fundraising success by an average of 15%. Fur…