Abstract:

According to the paper, "Toward a Better Understanding of Crowdfunding, Openness and the Consequences for Innovation," the number of backers a new product attracts during crowd funding predicts the financial success of the product when it reaches the marketplace - but the amount of money raised during crowdfunding does not.

Researchers from North Carolina State University started with data on more than 1,000 successful Kickstarter campaigns related to product innovations in four categories: technology, product design, hardware and video games. The researchers contacted the people behind those campaigns with a survey designed to learn more about their experiences and the market success of their products. The entrepreneurs were contacted one to two years after successfully completed crowdfunding campaigns.

The researchers were able to collect complete surveys from 173 crowdfunding entrepreneurs, and got partial responses from 51 more. Respondents had all run successful campaigns raising at least $10,000. The mean funding raised was $78,726, from an average of 1,078 backers.

It was found that crowdfunders who raised a lot of money were no more likely than those who raised smaller amounts to meet their sales, profit or other financial goals when their products later hit the marketplace. Margins on pre-orders tend to be much smaller than crowdfunding entrepreneurs expect and delays are common. Pre-order revenue doesn't generally translate into sizable enough margins for entrepreneurs to effectively leverage the proceeds of crowdfunding to the benefit of the product's mainstream market launch.

The researchers also found that crowdfunding entrepreneurs who exceeded their fundraising goals tended to have a decreased focus on radical innovation in the future. The more money raised beyond their goal, the less entrepreneurs focused on big, new ideas.

The second key finding was that the number of people who contribute to a crowdfunding campaign was an important contributor to the later market success of a product. In other words, the more backers a campaign attracted, the more likely the product was to exceed financial goals when it launched to the mainstream market.