EXPRESS: Business-to-Investor (B2I) Marketing: The Interplay of Costly and Costless Signals

Marketing to investors – especially when seeking funding for start-ups – is unique, with investors facing extreme uncertainty. This study uses foundational work in marketing, economics, management, finance, and psychology, as well as theories-in-use development with angel and VC investors to build a Business-to-Investor (B2I) Marketing theory. The theory proposes that investors rely on marketing signals from start-ups’ whether they are costly (financial, social, human, and intellectual resource endowments) or costless (verbal passion and concreteness). Results of a large quantitative field study of 5,334 written proposals from start-ups show that costly and costless signals have interactive effects on investor acceptance. The natural entrepreneurial tendency to compensate for a lack of costly signals with the use of passionate language backfires, reducing investor acceptance. Only when there is a number of costly signals communicated does a greater use of passion increase investor acceptance. Further, written proposals should be moderately concrete when they lack costly signals and should be formulated abstractly when plenty of costly signals can be offered. These contingencies provide insights into costly-costless signal interdependence in B2I marketing and suggest how start-ups can optimize their written proposals for investor acceptance.