Does Pitching Help Necessity Entrepreneurs Raise Funds Online? Evidence from a Randomized Control Trial in Tanzania

Resource acquisition is a fundamental entrepreneurial task, where entrepreneurs must persuade resource provider with a pitch. While opportunity entrepreneurs in developed countries have access to multiple sources of finance, necessity entrepreneurs in developing countries find themselves much more constrained. Prosocial crowdfunding has emerged as a viable solution, but these platforms are often intermediated by microfinance institutions and other actors, who craft the pitches on behalf of entrepreneurs and drive up the cost of credit. We investigate whether necessity entrepreneurs can craft an effective pitch with minimal instructions and raise funds in a prosocial crowdfunding setting. We introduced a platform specialized in direct lending (instead of intermediated lending) in Tanzania and ran a randomized control trial across seven locations. The control group learned about the existence of the crowdfunding platform and received only basic instructions about the structure of the pitch; the treatment group was also informed about the predictors of a successful pitch according to crowdfunding research. Our results suggest that the training increased the probability of success by 15.6% and the fundraising speed by 11.5%. Entrepreneurs in the treatment group were 45% more likely to repay their debt and interact on the platform through comments. We detected differential rates in posting the pitch on the platform, which do not allow us to rule out that the results can be explained by the treatment discouraging less able entrepreneurs to seek funds. We discuss these results in terms of training how to pitch as well as governance of prosocial crowdfunding platforms.