What drives success in the Crowdfunding campaigns? (2)
The number of scientific research addressing issues related to crowdfunding has increased rapidly in recent years. A significant part of those studies deals with the factors influencing the success of the crowdfunding campaigns. As I currently investigate the reward-based crowdfunding platforms in Taiwan, I had the chance to screen a number of scientific works concerning the determinants of success in crowdfunding.
When it comes to reward-based crowdfunding, there are 3 parties involved in the funding process: the platform, the initiator of the project, and the funders. The project itself might be also counted as the fourth one. Thus it is argued that the success of the campaign heavily depends on the characteristics of those 4 parties.
There are hundreds of papers exploring the extent to which those characters determine the success or failure or how they interact with each other. All in all, the outcomes of these studies provide valuable insight into the crowdfunding sector.
I will highlight the key factors which drive success in crowdfunding campaigns.
1. Crowdfunding Platform: The platform itself plays a crucial role. Does it have a marketing strategy for the platform and the projects? Who are the founders, do they have a good reputation? Does the platform possess any certificate, endorsement, third party seals? Having successfully funded projects helps also a lot. There are a number of platforms (like Austrian www.1000x1000.at )assisting founders during the preparation process before the campaign goes public. Additionally, the structure of the web page, the extent to which the user-interface attracts the audience also determines the success of the project. There are numerous articles investigating cognitive information processing (1)or message framing (2) in the crowdfunding context.
2. Text Description/Project Plan: The project plan involves professional explanations of the project steps in a convincing manner. According to studies, the number of words, the language of the description, so-called soft information, contributes greatly to crowdfunding success (3)and (4). Be cautious, a text can be any length and still not make sense to a reader if the language used is not easily comprehensible, according to (5)
3. Video: Having an illustrative video also pays off. There are numerous online freelancer platforms that provide video/animation services at a reasonable price. Most of the campaign web page visitors first click videos or looking at the photos before going ahead with the text descriptions. In case that the video or the photo is not convincing enough, they mostly leave the page before reading the descriptions. Even the speech emotion in the video affects the success of the funding (6). So, having a short, explanatory video is crucial for the pitching. There are numerous articles supporting this argument: (4), (7), (8), among others.
In the coming days, we will proceed with analyzing the following key factors which drive success in crowdfunding campaigns:
4-Picture, 5-Rewards, 6-Engaging in dialogue with supporters and prospective sponsors, 7-Social media attention, 8-Deadline effect, 9-Social Compliance- Initial funding — Kickstarter affect, 10-Project creators’ character/ previous experiences, 11-Gender, 12-Social Capital of the project initiator, 13-Country-Place of the project — Risk avoidance behavior, 14- Updating the progress of the project, 15-Non-financial returns to the sponsor/ reciprocity theory, 16-Amont of requested funding, 17-Founders donation to other projects, 18-Project category
References:
(1)Pirolli, P., & Card, S. K. (1999). Information foraging. Psychological Review, 106(4), 643–675.
(2)Moody, G. D., & Galletta, D. F. (2015). Lost in cyberspace: The impact of information scent and time constraints on stress, performance, and attitudes online. Journal of Management Information, 32(1), 192–224. doi:10.1080/07421222.2015.1029391
(3)Jiang, Cuixia, et al. “The impact of soft information extracted from descriptive text on crowdfunding performance.” Electronic Commerce Research and Applications 43 (2020): 101002.
(4)Tsai-Lien Yeh, Tser-Yieth Chen & Cheng-Chun Lee (2019) Investigating the funding success factors affecting reward-based crowdfunding projects, Innovation, 21:3, 466–486, DOI: 10.1080/14479338.2019.1585191
(5)Kuppuswamy, V., & Bayus, B. L. (2017). does my contribution to your crowdfunding project matter? Journal of Business Venturing, 32(1), 72–89.
(6)Kim, Jongho, Daegon Cho, and Byungtae Lee. “The mind behind crowdfunding: An empirical study of speech emotion in fundraising success.” (2016).
(7) Mollick, Ethan. “The dynamics of crowdfunding: An exploratory study.” Journal of business venturing 29.1 (2014): 1–16.
(8)Koch, J. A., & Siering, M. (2015, April 4). Crowdfunding success factors: The characteristics of successfully funded projects on crowdfunding platforms. Proceedings of the 23rd European Conference on Information Systems (ECIS 2015), Muenster, Germany. https://ssrn.com/abstract=2808424
