Crowdfunding, the practice of raising small amounts of money from large numbers of people, has enabled people around the world to start new businesses, fund initiatives, and raise money for themselves and others. Yet, not all crowdfunding efforts reach their desired goal. Why do some succeed, while others fail? This course will reveal the science behind successful crowdfunding, drawing on data from hundreds of thousands of campaigns. You’ll learn different types of crowdfunding approaches, and receive detailed advice on what to do (and what not to do) when crowdfunding. You’ll also have the unique opportunity to go behind-the-scenes with key players in the field with exclusive interviews from the founder of Indiegogo to successful campaign creators, to get the information you need to set your crowdfunding initiative up for success.
Who Succeeds at Crowdfunding?
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From the course by University of Pennsylvania
Crowdfunding
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From the lesson
Module 4
In this module, you’ll examine some of the science behind crowdfunding, including how crowds think, and how fraud and failure is spotted. By looking at examples of studies done on collective thinking and decision-making, you’ll learn about Linus’ Law and how the crowd exerts rational criteria when determining which campaigns are fraudulent or worthy of support. You’ll gain a better understanding of your backers and better leverage their influence to bring success to your own campaign. You’ll explore who is successful in crowdfunding campaigns, and the experience of women to see the value of sharing common ground with your backers. By the end of this module, you’ll have a deeper understanding of the components for success in crowdfunding campaigns, and be able to leverage them to successfully fund your startup or other ventures.
Meet the Instructors
Ethan MollickAssociate Professor
Associate Professor of Management- Wharton School
So in this lecture I want to talk about who succeeds at crowdfunding.
And this is important because you could be anyone watching this video.
And I want to talk about why crowdfunding has a potential to really democratize
who gets access to money and why you think that's important.
So I want to talk about why who you are is less important in crowdfunding
than other kinds of funding mechanisms for getting new ideas going.
And I want to talk about when activism could work for you in crowdfunding.
I'll explain more in just a second.
So who does crowdfunding?
So I don't have overall statistics for
everybody in all kinds of crowdfunding platforms.
But I do have some detailed information from my Kickstarter survey, and
there's some data from the Pew Foundation that it's also worth kind of going in to.
So in terms of who does crowdfunding and Kickstarter.
The average age of a Kickstarter funder is 39 years old,
about 50% are married, about 17% are minorities,
which is a slight disadvantage compared to the general population.
Though that number does seem to be creeping up over time.
In general, most people who do a Kickstarter projects are employed.
So they're either self-employed, which is somewhere over 40% overall if
you take into account independent contractors and entrepreneurs and
other self-employed folks.
About 10% are students and about 40% have full-time jobs.
Only about 4% of people are unemployed, so this is not something where people
are doing this as a way of making money when they don't have a job.
It is something that people are doing, as I've shown in other lectures on the side.
And again, it tend to skew older more married perhaps, than your typical profile
of an entrepreneur or Brooklyn based hipster crowdfunder, right?
So these is a much more demographic and
geographically diverse area than you might expect.
When Pew did their data, they looked at overall or crowdfunding, and
they found a higher skew of women than men.
I still find women make up a minority but a substantial one in Kickstarter.
But Pew found a higher rate, and they found attendance to sort of younger, and
sort of more millennial.
Again, that doesn't match this in my data, but
these are kind of overall pictures of crowdfunding.
So you could expect to see generally high representation of women compared to other
sorts of similar fund raising activities.
You can expect to see a range of ages.
Most people do have jobs, and are doing this on the side, but
quite a few of them are self employed or entrepreneurs and
their project may be about their entrepreneurial journey.
I spend a lot of time thinking about how crowdfunding can affect groups that don't
normally get easy access to money.
And I have some sort of good news and then some very specific advice, as well.
But the general good news is, if you raise money in crowdfunding then there
is no simple demographic factor that predicts whether you're going to fail or
succeed in delivering on your promises.
So it doesn't matter whether you were male of female, or other.
What your education level is, whether you're married or have a partner,
whether you work individually or in teams, what your race is, whether or
not you have children.
Everybody in all those groups equally likely to deliver and
equally likely to fail as any other group.
So you can't really fund people just based on race, gender or something else and
expect to see difference.
There isn't one here, which I think is kind of comforting.
That only covers their delivery and not who actually raises money.
And so what about getting funding?
Now I've been looking a lot at women and
crowdfunding in some of my recent research.
And some of that is with Jason Greenburg at NYU.
Some is with Valicia Rob at the Kauffman Foundation.
UC Berkeley, and I'll talk about that as well.
But what's interesting is overall,
women tend to do much worse in raising funds than men.
And I'm not talking about crowdfunding, I'm talking in general.
So women make up about 35% of business owners in the United States, but
only 2% to 6% of venture capital funded companies have female co-founders.
So women are really under-represented.
And there's lot of reasons for this, ranging from straight misogyny,
to issues with groups and group access.
But what's interesting is, this material reverses in crowdfunding.
So in crowdfunding, Jason Greenburg and
I found that women actually do 13% better than men.
That is, if a woman and a man have the same project,
a women is 13% more likely to be funded than men.
And this is encountered in every other area of funding where women
are disadvantaged.
So women tend to raise less through loans.
They tend to do less well through venture capital, angel funding, but
they do better in crowdfunding and the question is why?
And so originally when we looked at the data, we thought that the reason that
women might be doing better than men might be because there are areas in crowdfunding
that don't get a lot of venture capital funding.
But that women are traditionally have more interest in.
So for example, fashion, children's book publishing, there are more women than men.
And you could see at the bottom of this graph that in those areas, like fashion or
children's books publishing, women actually outnumber men.
So they're 57% of the backers of projects are women in fashion.
About 54% of the backers are women in publishing.
And in film, it's close to 50/50, 46% of the backers are women in film.
So maybe it's that female backers are actually supporting projects in areas
that they care about, like film.
And so, we'd expect to see then those orange bars, which are projects created
by women, would be much higher in those categories than the blue bars,
which are projects created by men.
But when we do all this statistical analyst,
it turns out that women are actually outperforming men
in these bottom two categories, in technology and video games.
It's not actually fashion and publishing and
those are the areas where there are the least women.
So what's happening is really interesting.
Women are actually doing better than men in the categories where there are fewest
women backing them, and where there are fewest women participating overall.
And we spent some time trying to figure out why this is the case.
And it seems the answer might be due to activism.
That women are actually interested in supporting other women in areas
where they're most under represented.
So it's not just about women finding projects that are interesting and
backing them.
It's also about women wanting to support each other and
using the Kickstarter platform to do that.
So we actually did an experiment to see if this is true.
We took a very successful project on Kickstarter,
which was MaKey MaKey which turns anything Into a computer keyboard.
And we actually took this project and removed the backers' names, and
then showed two versions of this project, one with a male creator and
one with a female creator.
So here we can see Jessica and Michael Smith, not their real names, but
you can see same ethnicity, same clothes, same smile, same direction.
And according to some analysis being done at Princeton,
these two are equally attractive.
So you can calibrate your own sense of attractiveness by looking at these people,
but scientifically, they're very close to equally attractive.
So we created two versions of this project, and people who saw this
project were either shown it with a woman or a male as a creator.
And we also measured whether or not people were activists or not.
So for women we measured whether or not they thought it was important to support
other women, and a variety of other factors, or
whether they didn't think these things were important.
So what happened was really interesting.
For the non-activist groups, which were about two-thirds of the women who didn't
think it was particularly important to support other women in technology.
When they saw the project created by a man,
they thought it was of higher quality than if it was created by a woman, right?
So they actually thought the male creative projects were better than the female
creative projects.
On the other hand, if you were an activist, you actually thought the project
created by the woman was better than the project created by the man.
Keep in mind, we didn't change anything about these projects.
Everyone just saw one of these things.
So, it was your attitude toward supporting others that actually made
a difference here.
And we found in further experiment when we actually look at whether people would be
willing to donate money, that the activist women were more likely to give money to
projects created by women.
And the less activist women were less likely to donate money overall.
So it turned out that the support for
women was not coming from just because the project was particularly good, but
also because women wanted to support each other.
There was no effect for men either way, so men were neither biased for nor
against women.
So the activism factor was what was driving success.
So what does that mean?
That means crowdfunding actually create opportunity and
not just because you can be anyone from anywhere, doing a project.
But also because you actually might be able to tap into a group of people who
are from similar background and
understand that you have a shared disadvantage between you.
So women have had trouble breaking into the technology field, or
under-represented in technology.
Other women who know that might be more willing to support you,
seeing you as another woman creator in a field that is under-represented.
So far, we found this effect in gender but some areas are less populated and
you less likely to see activism.
So there seems to be less of an effect, or even a slight negative effect for
African Americans trying to raise funds on Kickstarter.
And that might be because there's less of an African American community on
Kickstarter willing to help each other out.
As that community grows, we'd expect to see in the same activism effect kick in.
And that African Americans would actually be out performing other groups,
with the support of members of a similar race or ethnicity.
So what you need to think about with Kickstarter is not just your individual
actions about what you're doing.
But about how can you be helping other members of your disadvantaged group when
you're trying to raise funds as well.
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