An Exploratory Study into Rewards-Based Crowdfunding

Abstract

We use a dataset of over 200,000 projects, with a total funding of more than $1.2 billion, to investigate the main factors affecting the success rate of projects launched on the rewards-based crowdfunding platform Kickstarter. Our findings suggest that project creators that set a lower target goal size, time their fundraising campaign to avoid a high degree of inner-platform competition, and avoid initiating their funding campaign on holidays or on days leading into a weekend have a higher chance of successfully funding their projects. On average, successfully funded projects often surpass their target goal by small margins. We find that setting a longer duration for the funding campaign does not increase the probability that a project will be successfully funded. As opposed to the belief that crowdfunding serves solely as a signaling device for venture capitalists (VCs), we find that the vast majority of successfully funded projects launched in Kickstarter do not receive funding from VCs. By constructing a web-scraper and collecting real-time data, we observe that the funding rate over the course of successfully funded campaigns takes a U-shape. Using the real-time data collected, we examine crowdfunding webpage setup and find that the probability that a project exceeds its funding goal is positively correlated with the amount of images, videos, and text description.

Keywords: Financial Technology, Alternative Finance, Crowdfunding, Rewards-Based Crowdfunding, Kickstarter

JEL Classification: G32, L17, L26, L81, O3, M13