Online negotiations can affect investors’ view of business motivation, study reveals

In the investment market, the virtual environment can affect financiers’ perceptions of entrepreneurs’ behavior and consequently investment decisions. Online negotiations resulting from the COVID-19 pandemic brought about challenges to communication between entrepreneurs and angel investors. During in-person interactions, investors look at body language and facial expressions to evaluate an entrepreneur. Passion, arrogance and reliability are the main criteria considered. In the virtual context, however, the ability to interpret these signals is limited and investors rely on aspects such as voice intonation. To get around this problem, entrepreneurs should prepare themselves to communicate assertively in online presentations.

This is one of the findings of a paper by Nicole Kuhn and Gilberto Sarfati, researchers at the Sao Paulo School of Business Administration (FGV EAESP), published in the Journal of Entrepreneurship in Emerging Economies. The study looked at angel investors – experienced professionals who invest their own capital in early-stage companies. To understand how the online environment can affect these investors’ perceptions of the behavior of entrepreneurs, the authors studied a group of Brazilian angel investors between August 2018 and February 2021. They observed and analyzed startups’ investment pitches, as well as documents containing information gathered by the team about the companies. The scientists also conducted interviews with six members of a group of angel investors.

Online communication training can help entrepreneurs negotiate with angel investors

According to the study, the transition to the online environment brought about significant changes in the assessment of professionals’ passion for their business, one of the main subjective factors analyzed in pitches. During in-person negotiations, investors observe this criterion through enthusiasm in expression and body movements, as well as verbal communication. In the virtual environment, due to more restricted interactions, investors have come to interpret passion through the intonation of entrepreneurs’ voices.

On the other hand, evaluations of professionals’ reliability and arrogance did not show any significant changes. To analyze whether entrepreneurs are trustworthy, the content of their speech is more important than the body language used, allowing false or hidden information to be identified, for example. On the other hand, arrogance is perceived above all by the tone of voice and entrepreneurs’ receptiveness in answering questions. This indicates that factors related to body language are more relevant to assessing passion.

To improve entrepreneurs’ performance, the authors suggest working on verbal communication and body language in the virtual environment. It is especially important to demonstrate enthusiasm and motivation in speech. This includes the use of hand gestures and eye contact while speaking, in order to establish connections with investors. Professionals should also be trained to look directly at the webcam and they should not use resources and support materials that could contribute to a loss of eye contact, such as slide shows. Other tips include ensuring audio quality and good vocal intonation. These factors help investors make more positive evaluations and more favorable decisions regarding new ventures.

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