The Dynamics of Crowdfunding: Determinants of Success and Failure

Abstract:     
Crowdfunding allows founders of for-profit, artistic, and cultural ventures to fund their efforts by drawing on relatively small contributions from a relatively large number of individuals using the internet, without standard financial intermediaries. Crowdfunding has been drawing substantial attention from policy makers, managers, and entrepreneurs, but relatively little notice from academics, even though it touches on many topics of importance to scholars of entrepreneurship, including the determinants of venture success and the geography of entrepreneurship. Drawing on a dataset of over 48,500 projects with combined funding over $237M, this paper offers an initial description of the underlying dynamics of success and failure among crowdfunded ventures. It suggests that personal networks and underlying project quality help predict the success of crowdfunding efforts, and that geography plays a role in both the type of projects proposed and successful fundraising. Finally, I find that the vast majority of founders make serious efforts to fulfill their obligations to funders, but that over 75% deliver products later than expected, with the degree of delay predicted by the level and amount of funding a project receives.

Number of Pages in PDF File: 45

Keywords: crowdfunding, crowd funding, Kickstarter, venture, entrepreneur

working papers series