Proving traction and showcasing a great product are crucial to securing investment, but a startup’s name can also dramatically influence an investor’s perceptions before they’ve even set foot in the room, according to a study published last month in academic finance journal Venture Capital.
The research is based on a two-part study conducted by researchers from Stony Brook University, Drexel University, and Villanova University, who examined 131 crowdfunded projects and 1681 initial public offerings, reports Business Insider.
Easily pronounced names, such as Lyft and Uber, were found to be preferred by early and late stage investors, and tend to be offered more money through venture capital investors, crowdfunding and angel investors.
However, there is also merit in having a unique name, which can “evoke cues of unfamiliarity and create a perception of high novelty, which is valued by these pre-venture stage investors”, the study found.
Uniqueness is only a virtue with early-stage investors, however, with the study finding that since very little is known about a startup in its early stages, unique names give the impression that there is something special about the company.
In the later stages of a startup’s journey, investors looking at a company’s success care more about accurate valuation and growth metrics, so linguistics play a much smaller role in investment outcomes.
StartupSmart spoke to three uniquely-named Australian startups to find out how they chose their names, whether this affected their efforts to secure investment, and what entrepreneurs should know before settling on a brand.
David Ryan, co-founder of Corilla
For David Ryan, co-founder of technical publishing startup Corilla, coming up with the name of his startup was a case of taking inspiration from another company he admired.
“Somehow MailChimp made the world’s most boring thing — mailing list software — really fun. So I thought that’s a good influence. I remember pacing around the room and telling the team ‘we need to be fast and fun MailChimp … that’s a mailing list monkey … we need to be like… a content gorilla! Some kind of … Corilla”, he says.
His advice to other startups looking for…