Entrepreneurs often face the dilemma of whether to disclose risks associated with their ventures. While transparency can enhance credibility, it may also deter investors. A groundbreaking study published in the Strategic Entrepreneurship Journal explores how entrepreneurs can strategically disclose risk without deterring investors.

Conducted by Mark T. Bolinger of Appalachian State University), Katrina M. Brownell (Virginia Polytechnic Institute), and Jeffrey G. Covin (University of Wyoming), the research introduces a novel impression management tactic known as “compensation,” which enhances financing outcomes for early-stage entrepreneurs.

Instead of using actual donation histories to predict who might respond to fundraising appeals, nonprofits can use community-clustered profiles. The profiles use readily available public data to identify where potential supporters are more likely to live, based on demographic, financial, and social characteristics.