As many entrepreneurs well know, there are plenty of ways to scare off investors when you’re pitching your company. One not-so-obvious way to raise red flags, however, has nothing to do with your idea or how well you sell it.
According to the Wall Street Journal, a new study, “How Images and Color in Business Plans Influence Venture Investment Screening Decisions,” indicates that investors are less likely to take a stake in a company that has logos or products containing the color red.
The study’s authors, who examined results from a business-plan competition and two survey-based experiments, say that their research indicates that people tend to rely heavily on mental shortcuts drawn from our past experiences–also known as heuristics–when making split-second decisions.
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“Humans are not as rational as a lot of people tend to believe that we are,” H. Dennis Park, an assistant professor at Drexel University’s LeBow College of Business and one of the study’s authors, told the Journal. The color red is often associated with error or poor performance, especially in the U.S–think about all of your grade school papers marked up with red ink. A pitch or a logo containing this color may subtly remind an investor of mistakes and thus raise literal red flags about your startup’s potential.
Read more at INC.