The conventional wisdom for those seeking capital is clear: stay positive. When presenting a proposal to investors, the safest path seems to be to enhance strengths and minimize problems. After all, who wants to bet on someone who talks about failures, mistakes or insecurities?
However, our analysis of more than 30,000 entrepreneurial loan applications on Prosper, a leading peer-to-peer lending platform, revealed a counterintuitive result: proposals written with negative language were funded faster, had lower interest rates, and had fewer defaults than those that were neutral or positive.
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Simply put: Individuals who admitted mistakes, debts, or hardships attracted money faster—and paid back more reliably—than those who emphasized only strengths and optimism. When used carefully, negativity can be a powerful fundraising strategy.
Why negativity works
At first, the results intrigued us. Why would admitting past difficulties or mistakes make strangers more likely to fund you? Why would someone offer you money at a lower interest rate after reading about your problems? Our data reveals three reasons:
- Adjusting expectations
Investors expect to see difficulties, especially on platforms that attract people excluded from the traditional banking system. Perfect stories can seem suspicious. In contrast, frank descriptions of challenges sound realistic rather than evasive, making requests more believable. As one investor wrote:
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“I’m mainly interested in investing in people who have made some mistakes, fallen on hard times or just haven’t had a chance to build credit yet.”
2. Signaling honesty
Admitting failures has an emotional and reputational cost — which is precisely why it works as a strong sign of honesty. Investors often reward responsible disclosures—owning what went wrong and how it will be fixed—because it suggests the borrower will take responsibility for repayment rather than hiding problems. One investor stated:
“I will finance reliable and honest borrowers who will do everything they can to pay their loans in full and on time. I am open to lending to people with all types of credit history.”
3. Social support
Negativity sparked empathy. Investors weren’t just looking for financial returns — they wanted to help. As one of them put it:
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“I believe strongly in community over corporations, and I think Prosper offers an excellent opportunity to exercise our drive to help.”
Overall, the negativity did not drive investors away — it brought them closer.
The counterintuitive data
When analyzing more than 30,000 business loan applications, three quantitative patterns stood out:
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Proposals with negative language were funded about a day faster than neutral or positive ones — which is relevant considering that most successful campaigns close within three days.
Each incremental increase in negative sentiment was associated with lower interest rates — approximately one-tenth of a percentage point per level measured.
Loans with negative language had fewer delinquent debts, indicating that investors weren’t just being altruistic — results improved.
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These findings challenge traditional finance logic, which assumes that negative signals indicate higher risk and higher cost.
Lessons for entrepreneurs
The lesson is not to turn every pitch into a dark narrative. Excessive negativity can be self-sabotage. The bottom line is: recognizing real challenges — and following them up with a concrete plan — increases credibility.
The most effective proposals balanced directness and determination. Entrepreneurs admitted past mistakes and explained what they learned and changed.
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For example, an entrepreneur who had made poor financial decisions in college highlighted his current stable job and clear payment plan. The candor attracted investors; the plan reassured them. As one investor said:
“I’m more than happy to lend to honest, hard-working people with clear financial goals.”
Lessons for investors
Negativity should not be automatically read as a warning sign. In our data, negative disclosures often signaled trustworthiness: Entrepreneurs who were open about their problems received lower interest rates and were less likely to default.
Investors who filtered “down” narratives may have missed some of the best opportunities.
How to use negativity
The secret is in balance. Entrepreneurs seeking capital can consider three guidelines:
- Be specific
Generic complaints are less persuasive than admitting a concrete error with explanation and correction. This conveys authenticity and humanity. A Prosper investor wrote:
“I’m happy to invest my money in people who need it and who are honestly trying to get out of debt traps — and believe me, I’ve been through a lot of them.”
2. Connect the past to the future
Investors respond best when challenges are linked to lessons learned and future actions. As one investor said:
“As I seek to continue my financial growth, I hope to help those who truly need it — and together we will get to where we need to be.”3.
3. Avoid self-pity
Effective negative disclosures recognize problems without victimhood. They demonstrate action and resilience. One investor illustrated this well:
“I was a vice president at a large financial services company. Today I’m an assistant vice president and trust manager at a small community bank. Having gone through bankruptcy in the distant past, I understand the importance of starting over — and I believe people deserve that chance.”
A more flexible view on how to impress
For decades, personal impression recommendations have emphasized positivity—enthusiasm, confidence, passion. Our findings add nuance: In contexts of uncertainty and trust, openness about challenges can be equally — or more — effective.
Communication strategies are not universal. Entrepreneurs must align their approach with public expectations, the cost of dissemination and the social dynamics involved.
The irony of the research is that there is a positive side to the negative. Those who seek resources and admit mistakes while demonstrating a correction plan attract capital faster and at a lower cost.
Investors, in turn, receive more reliable payments. Both win. In a world full of rehearsed speeches, image curation, and empty optimism, negativity stands out. It differentiates proposals, creates connections and reduces the cost of capital.
In other words: negative can be positive.
c.2025 Harvard Business Review. Distribuído pela New York Times Licensing.
