Entrepreneurs seeking equity crowdfunding should target exactly £93,655 and assemble a team of 19 people to maximise their chances of success, according to new analysis that overturns established fundraising wisdom.
A study led by the University of East Anglia (UEA) and the University of Manchester analysed 1,189 successful campaigns on the Seedrs platform to identify the specific variables that drive investment. By applying a “truncated regression” model — which accounts for the hidden data of failed campaigns — the researchers identified a financial “sweet spot” more than four times higher than previous estimates.
While standard modelling techniques suggested an optimal target of just £20,615, the new analysis reveals that investors remain confident in contributing to projects with valuations up to £93,655 before considering the target too high.
“We find that the optimal target amount, the sweet spot, for entrepreneurs to raise is around £90,000,” said Peter Moffatt, Professor of Econometrics at UEA. “It seems that investors are happy to contribute to projects with targets up to £90,000 but consider targets above that to be too high.”
The equity paradox
The study also challenges the conventional belief that offering too much equity signals desperation. The analysis found that a higher percentage of equity offered actually increases the level of success.
“Our result of a high equity percentage contradicts findings from previous studies, which have found a negative effect related to this,” said Moffatt. “We suggest that if the percentage of equity offered is very low, this might be perceived as a signal that external investors are not regarded as important to the success of the project, and this might put investors off.”
Moffatt suggests that a low equity ratio may also signal that the company’s valuation is exaggerated, making investors wary.
The inverted U of teams
The research identified a specific “inverted U-shape” relationship regarding team size. While success rates rise as teams grow, they peak at approximately 19 members before declining, suggesting that larger groups risk internal disputes that worry investors.
However, the data revealed a surprising nuance: solo founders performed better than very small teams, with a “slight uptick” in success for single-entrepreneur campaigns compared to small groups.
The study also examined the impact of business sectors and pitch language. Campaigns in the “Automotive & Transport”, “Energy”, and “Finance & Payments” sectors performed significantly better than the baseline, whereas the “Data & Analytics” sector appeared to have a lower level of success.
Semantic analysis of project pitches revealed that specific words trigger investor behaviour. Projects containing “health”, “healthy” or “organic” saw significantly positive effects, whilst words like “entertainment” and “information” had a negative impact on fundraising.
