Rooting for the underdog: The influence of social status on capital allocation decisions in crowdfunding

Abstract

Crowdfunding represents a relatively new and increasingly popular source of financial capital for entrepreneurs. In recent years, crowdfunding has become increasingly viewed as a potential boon for otherwise excluded underdog groups, such as women or minorities. This unique contextual nuance raises the question of how status indicators, such as gender, influence funding performance of traditionally excluded underdog entrepreneurs and/or ventures on crowdfunding platforms. I draw upon extant research on underdog psychology, social exclusion, and social status to examine the effectiveness of various underdog status indicators communicated by 300 ventures seeking crowdfunding. Support was found for the underdog effect on the basis of entrepreneur gender and ethnicity, industry affiliation, and underdog language use in the entrepreneurial narrative.