Eye tracking in venture crowdfunding: Uncovering behavioral insights

While eye tracking is widely used and popular in consumer behavior literature, very few studies have introduced eye-tracking technology in entrepreneurial finance. EyeSee’s online eye tracking was recently used in a study conducted by researchers from Vlerick Business School, Politecnico di Milano, University of Ghent, and the University of Bergamo, and it was a pioneering use of the technology in entrepreneurial finance research – and it delivered vital findings about behavior on equity crowdfunding pages. Read on for an exclusive interview with one of the study authors, Xavier Walthoff-Borm.

Study authors:
Vincenzo Butticè , Veroniek Collewaert, Silvia Stroe, Tom Vanacker, Silvio Vismara, and Xavier Walthoff-Borm.

Equity venture crowdfunding is very competitive, and eye tracking helped prove that amount of stimuli/info is provided might make a big difference in the funding outcomes – what are some of the recommendations for getting your page or website right?

Equity crowdfunding is competitive as increasingly more entrepreneurial ventures are using this type of crowdfunding, still, the success rates of securing equity crowdfunding are much larger compared to traditional equity markets. It was important to focus on what drives attention to the amount and type of information in equity crowdfunding deals as people’s attention is limited in digital markets, yet traditional finance theory assumes all information is captured by prospective investors. We found that much information is not observed in equity crowdfunding markets and people’s human capital uniquely affects how they look at deals. The extent to which this impacts actual investment behavior, and the funding outcomes is still an open question. However, it is important for entrepreneurs to make the first page (home page) right as we found that most people are limiting attention to this page only. When designing your home page, it is important that you don’t create information overload. Consider all relevant information aspects but choose your hook wisely for each information aspect. Moreover, refine your writing style so you avoid too much description.

Eye tracking has extensive use in the world of consumer behavior, UX and E-commerce testing – and now, it has helped you better understand what happens with funders. What are the factors in the investor profiles affect the way they look through a page for crucial info?

While eye tracking is widely embedded in consumer behavior literature, only few studies have introduced eye tracking technology in entrepreneurial finance.  We were the first to use online eye tracking technology which allowed us to run a large-scale experiment with real investors. We investigated the human capital of investors and the extent to which it affects their attention behavior to information aspects when evaluating early-stage equity crowdfunding campaigns. Traditional academic literature argues that people attend to signals – think of aspects with regard to the product, the team or the market potential that the entrepreneur is using to signal the potential of an investment opportunity – to assess the quality of early-stage deals. While the crowd in equity crowdfunding markets is heterogeneous, we disentangled human capital into general capital (i.e., their education level and entrepreneurial experience) and specific human capital (i.e., previous industry-specific experience and equity crowdfunding experience). We find that both types of human capital uniquely affect the way people look at early-stage equity crowdfunding deals. For example, specific human capital reduces how many different signals people attend to and the time it takes to do so. In contrast, general human capital increases the signal set size and the time to form a signal set. What is more, both types of human capital influence the composition of the signal set differently. General human capital is increasing peoples’ attention to the entrepreneurial team, while specific human capital is decreasing attention to the entrepreneurial team. Specific human capital (such as equity crowdfunding experience) is mainly increasing the attention to product aspects of the campaign. We also find gender to be influencing attention behavior. Females are less attracted by the financial and strategical aspects of early-stage deals.

Perhaps counter-intuitively, it is not always humans and stories that draw attention – in a competitive online environment such as Equity crowdfunding pages, there are other elements that might matter more? What are those attention-grabbing campaign aspects you need to ensure are perceived in order to increase your chances of securing investments?

If you want to increase your chances of securing investments, you have to make sure that all relevant and important information is provided on the home page. Most people limit their attention to the home page only. Be specific and be bold in the information you provide on those campaign aspects that you believe make an impact since people’s attention is bounded in online financial markets. Your first entry is the most important one, and this is not different in entrepreneurial finance. We would emphasize the value of carefully considering and drafting the most relevant information on the home page as entrepreneurs have to quickly establish interest and credibility. While the crowd is heterogeneous, and human capital is uniquely affecting attention behavior, it is difficult to make general statements about which campaign aspects are most important and would increase the chances of securing investments. Moreover, we didn’t investigate their investment behavior yet were focusing on the time they spend on different campaign aspects. The proportion of time fixated on these aspects is reflecting engagement of attention, which is different from the importance of the information for a decision-maker. The most important takeaway would be to know your crowd and draft your information on the crowdfunding page accordingly.

How does buying online differ from participating in equity fundraising?

The boundary conditions in the buying process of online shopping are different from those in the stock buying process of private early-stage firms. Mostly, because of the higher uncertainty in early-stage investment decision making as past information is limited, the information provided is less tangible (accurate) and the decision outcome uncertain and laying in the distant future. Besides, the decision process is more challenging as most people in equity crowdfunding develop their own understanding of the decision outcome without the confessions of reviewers or third-party advisors. These boundary conditions may affect how investors look at deals and how shoppers look at the packaging. Accordingly, I am afraid it would be comparing apples to oranges. Yet, studies investigating how shoppers look to packaging suggest the existence of a limited attention span as well. The observed visual attention behavior seems similar as people tend to focus on easy observable signals (such as prices and brands) rather than detailed information processing (e.g., reading nutrition information). People have the objective of finding information convenient to their primary information needs to reduce cognitive costs. After all, it seems we are lazy thinkers and cognitive misers despite the setting.

EyeSee’s remote webcam-based eye-tracking technology has an extraordinarily extensive field of application spanning consumer research, academia, business, or advertising research. Due to its simplicity and wide availability, it is truly a disruptive moment that democratizes eye-tracking. Because eye tracking is now available online to anyone with a computer, it has an exponential effect on the recruitment pool of respondents in comparison to using eye tracking devices or central location laboratories.

Want to learn more about how you can combine online eye tracking with other traditional and behavioral methods to drive your business forward?

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