Published: 5 September 2016 at 15:00
New research to be presented at International Telecommunication Society conferenceTopics ranging from why only one in four crowdfunding campaigns succeed to the trade-off between free online services and privacy will be discussed this week (7-9 September) at the 27th European Conference of the International Telecommunication Society.
Of the 9,652 Kickstarter projects examined by Professor Giovannetti (pictured above) and his co-author William Davies between November 2015 and March 2016, 2,530 (26%) were successful while 7,122 (74%) failed in their objectives.
They studied the main causes of their success or failure and have produced a model which delivers an 87% chance of correctly predicting the outcome of a crowdfunding campaign.
The academics discovered that there are six key factors that drive the success of a campaign:
1 Reputation. The number of previous crowdfunding campaigns increases the chances of success. Reputation helps to build trust, which is necessary in an information asymmetric environment such as the finance of innovation.
2 Reciprocity. A project is more likely to succeed if the person behind it has backed projects created by other people.
3 Timing. Early funding is a good predictor of success with other backers likely to jump on the bandwagon, while slow initial progress has negative implications.
4 Social networks. External social capital, such as Facebook connections on a project page, has a positive, albeit small, impact on success.
5 Ambition. The amount of funds the campaign must reach to be successful has a negative effect on the probability of success. Given the reward structure of Kickstarter, it might reflect a perception of ambition as an antisocial feature not suitable in online crowdfunding.
6 Impatience. The longer the duration of the campaign, the less likely the project is to succeed. This reveals a positive aspect of being impatient.
Professor Giovannetti, Deputy Director of the Institute of International Management Practice at Anglia Ruskin University, said:
“Our model accurately predicted the outcome of 87% of Kickstarter campaigns, including predicting 96% of the projects that failed.
“What is particularly interesting is that certain attributes such as ambition and patience, traditionally seen as positive traits, appear to have a negative impact on the success of a project.”