It’s never too late for (pre)-sales: the dynamics of crowdfunding

The world is a strange place. Unknown of until recent years, crowdfunding platforms – like Kickstarter or Indiegogo – are making the headlines around the world. Thousands of people are donating money to help artists produce their records, graphic novels, video games; or to allow geeks to produce a tool to transform bananas in a piano (and other things, too), a smart handle for cool bikes or even a set of tools to make robots with drinking straws. More: a project founder might ask for, say, fifty thousand dollars to produce a wheeled plastic cooler, and receive support for thirteen million, 260 times as much.

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Why is crowdfunding so successful? Some people argue that it taps into a hidden reservoir of altruism present in internet communities – and that asking for help is the first step to get it. Add on top of this the internet, that allows every sort of niche – no matter how remote – to find its devoted supporters, and you might get near to understanding why crowdfunding is booming.

But is this the whole story – find a niche, fill it with a clever idea, and off you go to a successfully (crowd)funded project? How about failed project? Were they not-so-clever after all, or didn’t they find their niche? Moreover, not all projects are a success story from the very start: some never make it off the ground, some are successful only at the very end, and some have rollercoaster rides over their funding period. Is a head start necessary for project success? To answer all thee questions it is crucial to dig deeper into the motivations of the crowd. Why do people back projects?

In a new paper with Tobias Regner we explore these questions using data kindly provided by Startnext, the biggest German crowdfunding platform. The answers indicate that it is fairly possible for not-so-successful projects to make it thanks to a last-days surge in pledges, and that project success seem to have to do much more with sales than with altruism. Continue reading “It’s never too late for (pre)-sales: the dynamics of crowdfunding”