Entrepreneurs in Colorado should know that the type of name that they have for their startup could be a factor in the amount of funding they are able to obtain. Startup names that are easy to pronounce are favored by investors in the early and late stages of a startup’s development. Angel investors, venture capitalists, crowd funders and IPO investors tend to provide more funding to these companies.
A two-part study to assess the effect the name of a business has on funding was conducted by researchers from the business schools at Drexel University, Villanova University and Stony Brook University. For the first part of the study, 131 crowd-funded projects were analyzed by the researchers. For the second part of the study, 1681 IPOs were examined.
Startups that have distinct names are also favored by early-stage investors. According to the study, unique names can indicate that the company is special, which can be useful for companies that are still in their early stages and that have not yet established their reputations.
The study also found that startups that have names that are difficult to pronounce can give off an impression of novelty, which is useful in attracting investors during the pre-venture stages of a company. However, that same novelty can put off investors in later stages.
Unique names are not as valued during the later stages. Investors that are assessing a company that has shown itself to be successful tend to place more value on the precise valuation of the company.
An attorney who practices business and commercial law can assist entrepreneurs through the legalities of business formation and financing. Clients can receive assistance for creating a business plan or negotiating contract terms with angel investors. The attorney may also advise on securities law as it relates to certain business transactions.