Phonetically Fluent Names Generate Immediate Trust and Better Financing Terms
Research by Stony Brook, Drexel and Villanova Universities led by entrepreneurial psychology expert Richard Chan indicates that your business name can influence how much money you get from early and late-stage investors1.
“Linguistic and phonetic fluency distinctively influence investment decisions in different stages,” says Chan.
🔖 Linguistic fluency indicates how frequently a word appears in common language, if at all.
🔖 Phonetic fluency assesses the patterns of letters in a word and how often those sounds appear in other areas of language. In essence, hard to spell and pronounce names are not well remembered.
Easily pronounced names have been shown to get more money during funding rounds, according to Chan:
Entrepreneurs could achieve more favorable financing outcomes in pre-venture stages and attenuate IPO underpricing in post-success stages by adopting a more phonetically fluent company name.
When a word is familiar it can “assuage investors’ feeling of risk and elicit their experience of ease in processing information,” according to Chan.
In other words, common dictionary words make people feel more comfortable investing in your company.
Take Uber as an example – the company name is unique but also easily pronounced and is found in common speech.
If you compare Uber’s brand and domain name (Uber.com) to one of its competitors, Lyft (Lyft.com), it’s easy to recognize how Uber’s domain name is more phonetically fluent than Lyft and how that name has helped it to become the number one ride-hailing company for consumers in the U.S.
Bitcoin wallet provider Blockchain is another example: when the company raised $40 million series B round in mid-June 2017, they were able to slingshot off the explosive growth of bitcoin2 – which has trended up alongside, and because of, blockchain technology.
Holding the killer brand and domain name Blockchain.com brought in huge amounts of traffic because of consumers’ familiarity with the word. They would not have gained nearly as much traffic, and success in fundraising, if their domain name was not a recognizable word like Blockchain.com.
