The expectations game: The contingent value of hype as a rhetorical strategy in resource mobilization processes among AI startups

Authors

• Judy Rady, University of Kansas School of Business
• David Townsend, Virginia Polytechnic Institute and State University
• Rick Hunt, Virginia Polytechnic Institute and State University
• Joseph J. Simpson, The University of Texas Rio Grande ValleyFollow

Document Type

Article

Publication Date

7-1-2025

Abstract

Technology startups confront a critical dilemma when attempting to use hype to mobilize resources under conditions of extreme uncertainty. While some scholars argue that high levels of hype play a key role in securing resources to fund startup growth, others caution that the excessive use of hype risks triggering investor skepticism, thereby undermining the extent to which investors judge a startup's claims to be plausible. To assess the validity of these competing conceptions, we analyze 302 artificial intelligence startups across 880 financing rounds using a combination of established econometric methods and emerging machine learning techniques. Our findings reveal the presence of an inverted U-shaped relationship between hype and resource mobilization, wherein investor valuations increase with hype up to a critical threshold, beyond which further hype diminishes valuation outcomes. Moreover, our analysis shows that factors enhancing the comprehensibility and credibility of hype partially offset its diminishing returns, flipping high levels of hype from a liability into an asset that improves startup valuations. Our novel theorization reconciles the performative and pejorative views of hype by demonstrating that hype's impact is contingent upon both its magnitude and the factors influencing investor plausibility judgments. In addition to materially enhancing the methodological toolbox used to assess startup rhetoric under uncertainty, our approach also provides important insights for entrepreneurship research attendant to the strategic management of visionary claims, especially when start-ups attempt to balance investor enthusiasm with realistic expectations in emergent technology sectors.

Comments

Original published version available at https://doi.org/10.1016/j.jbusvent.2025.106499

Recommended Citation

Rady, J., Townsend, D., Hunt, R. and Simpson, J., 2025. The expectations game: The contingent value of hype as a rhetorical strategy in resource mobilization processes among AI startups. Journal of Business Venturing, 40(4), p.106499. https://doi.org/10.1016/j.jbusvent.2025.106499

Creative Commons License

This work is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 3.0 License.

Publication Title

Journal of Business Venturing

DOI

10.1016/j.jbusvent.2025.106499