crowd funding

Crowd-funding, is a way of raising money for a new venture, that has become big business these days. Oops! Well, there seems no fuss at all to bring up this informative article for you as such read it all through.

Right from a small start in year 1997, it was estimated to be an industry worth more than USD 34 Billion in the last year but crowd-funding still in their infancy and as with any tool they can be in any case misused so that their potential for bringing innovations to the markets could be hampered.

While it was on initial research what distinguishes successful crowd-funded projects from those that do not achieve their goal began to prove by the team from Anglia Ruskin University looked at 9,652 projects — both successful and unsuccessful — from the crowd-funding platform, Kickstarter, which being one of the largest reward-based crowd-funding platforms, having raised more than US$2 billion (£1.6 billion) since their launch in 2008.

As all applicants for funding through Kickstarter are needed to post specific and detailed information, which meant to enabling to drill down into each separate scheme and develop an overall understanding of the traits each had or hadn’t got in common that enabled them to attract crowd-funded investment. While isolating six main traits that successful crowdfunding campaigns had in common, it was observed.

Keys to success

Timing: On the way through quick in responding to the funding and backing are key to successful crowd-funding as such. The more backers and funding received in the first few days of a campaign, the more likely it is to become successful indeed. This brings up the criterion that designing a campaign to reward the early backers will lead to it being more successful. Successful projects on average raised 39% of their funding goals by the end of the first sixth of the campaign – with many securing their funding before this early limit was reached. This compares to failed projects which managed to rise on an average less than 4% of their funding goal in the same time period, it was also observed.

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Networks: This may come as little surprise that having large online social networks might help entrepreneurs achieve success when it comes to crowd-funding their ideas, worth noticing, wow. While project proposers add an online social network link to their project’s pages, they point out that they are intentionally using their social network in order to boost their crowd-funding campaigns. The successful campaigns on the dataset had an average of 1,024 Facebook friends, which is an aspect of the social media ‘make up’.

Temper your ambition: Ambition might be perceived as a key to success for innovators and is after all it takes ambition to launch a crowd-funding bid as such. While it was identified that many projects, which were simply over ambitious were shown by the negative impact that a high funding goal has on the chances of a project’s success might not be so strong enough. In other words and as a matter of fact, Projects which failed on average received less than 6% of their funding goal, with some rising less than 0.0001% of their funding goals.

Image: The Conversation

Image: The Conversation

Impatience: If on no patience it would lead towards getting off the ground by increasing the probability of a project‘s success. This might be counter-intuitive – as one would expect that giving a campaign more time would help it succeed but it is not. However, when it comes to crowd-funding, backers are impatient – they want to get the projects they support off the ground as early as possible. In fact, they are so impatient that the shorter the declared duration of the campaign, the more likely the project is to achieve success.

Reputation: It was identified on a large scale of projects from entrepreneurs who had already successfully launched the campaigns. This brought in improvements for the chances of a project’s success, as it increased the reputation of this creator generating trust with accordance as this is very important in an environment such as crowd-funding where the entrepreneur knows much more about the characteristics of the new product or service to be launched than the potential backers.

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Reciprocity: In an imaginative community, as such created by crowd-funding platforms, it was found that supporting other people’s projects could be a good way to attract support for one’s own, which is what matters a lot with positive impact of reciprocity indicating that crowd-funding platforms are virtual communities – where altruistic behaviour makes innovators more likely to achieve success.

Crowd-funding matters

Crowd-funding is on a level that every single one of the characteristics was found to be significant in affecting the success and failure of the projects measured purposefully. The developments of these features into a model, which enabled to correctly predict the outcome of more than 87% of Kickstarter campaigns worth of also looking upon.
Why does all this matter after all? And why should we care about crowd-funding? Because crowd-funding is now a global phenomenon – around the world more and more people in more countries are using this method of raising funds to support their ideas.

The map below shows the geographic distribution of the projects analysed –

Image: The Conversation

Image: The Conversation

Crowd-funding is a global enterprise with a single crowd-funding platform raising funds in more than 100 countries. But it also demonstrates how crowd-funding is still limited in Africa and South America – the areas which may most benefit from using crowd-funding to get a good idea off the ground or out of the box to say so.
Many a massive enterprise has started small and in a modern post-industrial landscape, used crowd-funding to bring a brainwave to life will be increasingly important in providing jobs and creating wealth, that’s all for now, which matters a lot to all of us.

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