Crowdfunding innovative but risky new ventures: the importance of less ambiguous tone

Crowdfunding provides a novel and potential way for innovative but risky new ventures to fund their new product development (NPD) projects. To help potential investors evaluate the projects and enhance the credibility of disclosure, founders are struggling with how to phrase the project description. The rapidly growing cleantech crowdfunding projects provide an ideal context to study this issue. We collected information on cleantech crowdfunding projects and matched non-cleantech crowdfunding projects from Kickstarter. The sample period extends from January 2013 to October 2018. Using signaling research as a theoretical lens and a dictionary-based, computerized text mining method, we found that founders of high-quality cleantech crowdfunding projects could create a reliable signal of quality by providing a project description with a less ambiguous tone and thus boost the success of crowdfunding. Moreover, the signaling effectiveness of a less ambiguous tone is more pronounced in cleantech crowdfunding than in matched non-cleantech crowdfunding, suggesting that the marginal benefit of using a less ambiguous tone is larger when the industry information environment is noisier. Further evidence shows that the signaling effectiveness of a less ambiguous tone in cleantech crowdfunding could be strengthened by backers' endorsements. Our findings imply that tone ambiguity in project descriptions is related to founders' information-concealing behavior. Potential investors could search ambiguous words in project descriptions and just allocate their limited attention into projects with a low percentage of ambiguous words to avoid information overload. Founders of high-quality projects could boost crowdfunding success by using a less ambiguous tone to describe their projects. The marginal effect is larger when there is greater uncertainty about project prospects.