Crowdfunding as a Social Movement: The Determinants of Success in Kickstarter Campaigns

Abstract

Crowdfunding, which can be loosely defined as raising capital through small contributions from a large numbers of investors, is an increasingly popular practice among entrepreneurs. Kickstarter, the largest crowdfunding platform, uses an “all or nothing” approach: projects must reach their funding goal within a set time period before any money can be allocated. Therefore, it is in the interest of project creators to understand the determinants of success before the funding period begins. Models of social movements indicate that when conformity is a concern, high initial participation can lead to herding behavior. In contrast, if backers are only interested in a project’s success, then others’ contributions will encourage free riding. Results based on data collected daily from two months of Kickstarter projects show that funds raised in the first day of a campaign are positively related to the percentage of the funding goal raised at the campaign’s end. However, when controlling for a project’s total backers, first day backers are negatively associated with measures of success.

Keywords: Crowdfunding, social movements, threshold model, entrepreneurship

JEL Classification: L26, C63, G23