Two hearts that beat as one: Signals, narratives, and financing (less) novel ventures via equity crowdfunding

Research Summary
Financial resource acquisition is crucial for ventures but hindered by uncertainty. While signaling mitigates this uncertainty, its effectiveness hinges on venture novelty and the narratives used to clarify embedded information. Adopting a configurational lens, we examine the interplay among novelty, signals, and narratives in equity crowdfunding (ECF). Applying qualitative comparative analysis (QCA) to 98 ventures on a UK ECF platform, we reveal multiple equifinal pathways to fundraising success and demonstrate that novelty acts as a critical contingency factor: novel and less-novel ventures require distinct configurations of signals and narratives, and narratives that clarify signals play a crucial role for novel ventures. Our findings extend research on signaling theory, entrepreneurial narratives, and entrepreneurial finance with a nuanced understanding of the interdependence among novelty, signals, and narratives. Managerial Summary
Novel and less-novel ventures face distinct challenges in convincing investors, and we show that there is no "one-size-fits-all" strategy in fundraising. Our study demonstrates how entrepreneurs can convince investors using signals and/or narratives that align with the novelty of their ventures. For novel ventures, specific and coherent narratives are particularly helpful in clarifying signals that contain complex information. Conversely, less-novel ventures that refine existing offerings may improve fundraising performance by simply emphasizing signals that demonstrate clear product-market fit. We therefore suggest that entrepreneurs should view signals and narratives as complementary tools and tailor their fundraising strategies to match their ventures' novelty and achieve fundraising success.