What’s in a logo when it comes to crowdfunding?

Visual cues such as logos, illustrations, photos, and images are pervasive on digital equity crowdfunding platforms. However, they are perceived to have low or no association with venture survival and profitability. This research dispels this perception by showing that visual cues can influence investors’ funding decisions.

What You Need to Know

Logo complexity can inform backers’ perceptions of venture innovativeness. More complex logos are perceived as more unique, original, and novel by backers who often value innovativeness. Hence, increasing logo complexity can increase the amount of funds invested in ventures.

More Details

What Did the Researchers Do?

Ammara Mahmood, Jonathan Luffarelli, and Mudra Mukesh built on processing fluency theory and visual heuristics to propose a processing-disfluency-based heuristic framework for understanding the influence of low validity visual cues on equity crowdfunding platforms. They used a multi-method approach to find support for their framework, across three different studies.

First, the researchers used a survey-based approach to demonstrate the impact of logo complexity on perceived venture innovativeness. In the second study, field data was used to demonstrate the impact of logo complexity on backers' funding decisions. Finally, the third study replicated the findings of the first two studies in a controlled experimental setting and documented the processing-disfluency-based mechanism underlying the effects of logo complexity on backers' perceptions and funding decisions.

What Did the Researchers Find?

The researchers discovered that visual cues, and particularly logos, can influence backers on equity crowdfunding platforms. They show that even though logos are cues that often do not communicate private information, are not costly to produce, and are easily imitated by other ventures, the subjective experience of ease/difficulty with which backers perceptually process logos can be interpreted as signals by backers, and inform their perceptions of ventures and funding decisions.

Specifically, since visually complex logos are perceptually more difficult to process (i.e., more disfluent), they are likely to be perceived as less familiar and thus more unique, original, and novel by backers. As such, they positively impact backers' perceptions of venture innovativeness. Since backers often value innovativeness in entrepreneurial ventures, this perception leads to increased willingness to invest.

How Can You Use This Research?

This paper holds valuable insights for entrepreneurial ventures engaged with crowdfunding platforms. The authors demonstrate that entrepreneurs should favor using more, rather than less complex logos. They also show that while entrepreneurs offer favor less complex logos, this may result in not fully leveraging the benefits of more complex logos.

Want to Know More?

Contact: Ammara Mahmood

Article Citation: Mahmood, A., Luffarelli, J., & Mukesh, M. (2019). What's in a logo? The impact of complex visual cues in equity crowdfunding. Journal of Business Venturing, 34 (1), 41-62.