How to Design Your Project in the Online Crowdfunding Market? Evidence from Kickstarter.

Abstract

Raising money in the online crowdfunding market is an important way for start-up enterprises to start their entrepreneurial projects. However, how to help creators design their projects in this market is still an open and very realistic issue. In this study, we collect a unique dataset from Kickstarter (a leading crowdfunding platform in the U.S.) to examine the impacts of reward scheme related and unrelated factors on projects’ crowdfunding performance based on solid theories. We use a Heteroscedasticity-based instrument method to solve the endogeneity of backing price. We found that a project creator can raise more money in the crowdfunding market if he/she sets a bit higher maximum backing price; lists relative fewer reward tiers in their reward schemes; publishes well designed project homepage; and communicates with backers as much as possible during the project’s survival time. We also discuss the implications for project design in this market.