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The Economics of Crowdfunding pp 151–182Cite as

Palgrave Macmillan

Crowdfunding Creative Ideas: The Dynamics of Project Backers

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Abstract

Entrepreneurs are turning to crowdfunding as a way to finance their creative ideas. Crowdfunding involves relatively small contributions of many consumer-investors over a fixed time period (generally a few weeks). The purpose of this chapter is to add to our empirical understanding of backer dynamics over the project-funding cycle. Publicly available data of two years on projects listed on Kickstarter are used to establish that the typical pattern of project support is U-shaped—in general, backers are more likely to contribute to a project in the first and last weeks as compared to the middle period of the funding cycle. We further establish that this U-shaped pattern of support is pervasive across projects, including both successfully and unsuccessfully funded projects, those with large and small goals, and projects in different categories. We then empirically explore the dynamics associated with several factors, including collective attention effects from platform-sorting options, the role of family and friends in supporting projects, the effects of social influence, and the role of project updates over the project-funding cycle.

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Notes

  1. 1.

    Shortly after our data collection in March 2012, Kickstarter removed this information from their updated website design.

  2. 2.

    One project had a goal of over USD 21 million (Kickstarter’s limit) to help reduce the national debt (http://www.kickstarter.com/projects/2116548608/help-erase-the-national-debt-of-the-usa?ref=search). This project only had eight backers who pledged USD 180.

  3. 3.

    The largest funded project in our sample received a little over USD 95,000. Since our data collection, several projects have received over USD 1 million in funding.

  4. 4.

    An alternate measure involving the number of competing projects in the same category as project i gives the same results across all our estimated models as those reported for ActiveProjects.

  5. 5.

    The consistent drop in the coefficient estimate for the very last day comes from the fact that projects end at various times during the last day, that is, many projects do not have a complete 24 hours of funding time on the last day.

  6. 6.

    Yan Budman, Director of Marketing at Indiegogo, reports a similar pattern of backer behavior for Indiegogo projects (Budman 2012).

  7. 7.

    Some of our preliminary analyses involving the Kickstarter (all-or-nothing) and Indiegogo (keep-it-all) communities suggest that the goal-gradient effect is robust across platforms.

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Acknowledgments

Comments from participants in research workshops at the University of North Carolina at Chapel Hill, Duke, University of Illinois, University of Utah, DRUID 2013, Emory, HEC Paris, and University of California at Berkeley helped to improve this chapter. We also thank Atul Nerkar, Page Ouimet, Avi Goldfarb, Tarun Kushwaha, Sri Venkataraman, Rich Bettis, Jennifer Conrad, Amin Sayedi, the book co-editors, for helpful comments on an earlier draft.

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Authors and Affiliations

  1. Kenan-Flagler Business School, University of North Carolina at Chapel Hill, Chapel Hill, NC, USA

    Venkat Kuppuswamy & Barry L. Bayus

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  1. Venkat Kuppuswamy
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Editors and Affiliations

  1. Schulich School of Business, York University, Toronto, Canada

    Douglas Cumming

  2. Faculty of Business Studies and Economics, University of Bremen, Bremen, Germany

    Lars Hornuf

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Kuppuswamy, V., Bayus, B.L. (2018). Crowdfunding Creative Ideas: The Dynamics of Project Backers. In: Cumming, D., Hornuf, L. (eds) The Economics of Crowdfunding. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-319-66119-3_8

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