The dynamics of crowdfunding: An exploratory study

TLDR

Crowdfunding enables founders of for‑profit, artistic, and cultural ventures to raise capital from many small contributors online, bypassing traditional financial intermediaries. Using a dataset of 48,500 projects totaling $237 million, the study describes the dynamics that drive success and failure in crowdfunded ventures. The analysis shows that personal networks and project quality predict success, geography influences project type and fundraising outcomes, most founders meet obligations but over 75 % deliver products later than promised, with delay correlated to funding level, offering insights into crowdfunding and founder behavior in entrepreneurial financing.

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. Drawing on a dataset of over 48,500 projects with combined funding over $237 M, this paper offers a description of the underlying dynamics of success and failure among crowdfunded ventures. It suggests that personal networks and underlying project quality are associated with the success of crowdfunding efforts, and that geography is related to both the type of projects proposed and successful fundraising. Finally, I find that the vast majority of founders seem 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. These results offer insight into the emerging phenomenon of crowdfunding, and also shed light more generally on the ways that the actions of founders may affect their ability to receive entrepreneurial financing.