In this paper, Professor Ethan Mollick of the University of Pennsylvania examines a Kickstarter data set comprised of 47,000 projects from May 3, 2009 to August 1, 2012 that has been gathered by Jeanne Pi using a scraper script. He uses a statistical analysis called a logistic regression to determine the effect that independent variables have on the dependent variable of whether or not the project meets its fundraising goal. These independent variables include: size of project owner’s social network, duration of the campaign, fundraising goal, category, and more.
His results can help entrepreneurs and project owners compare Mollick’s statistically significant results with Kickstarter’s advice regarding project fundraising success. This can lead to a better understanding of why projects succeed when others fail and how others can replicate the measures that produce project success. The following are Mollick’s findings:
Among Kickstarter projects, failures happen by large amounts, successes by small amounts. Projects that fail tend to fail by large margins.
The mean amount funded of failed projects is 10.3% of the goal. Only ten percent of projects that fail raise 30% of their goal, and only three percent raise 50% of their goal. The average failed project received $900 in pledges, compared to $7,825 for successful projects.
Projects that succeed tend to do so by relatively small margins. Twenty five percent of projects that are funded are 3% or less over their goal, and only fifty percent are about 10% over their goal. Only about 1 project in 9 receives 200% of its goal.
Of the 106 projects with goals over $100 that received over 10 times their goal, 33 were very large projects (raising over $100,000). All of these 33 overachievers were in hardware, software, games, or product design.
Increasing goal size is negatively associated with success. Being featured is strongly associated with success. Surprisingly, duration decreases the chances of success, possibly because longer durations are a sign of lack of confidence. Categories also had varying success rates.
A 30 day duration project has a 35% chance of success, while a 60 day project has a 29% chance. An unfeatured project has a 30% chance of success, while a featured project has an 89% chance.
Social networks predict success. Returning to the Film category and assuming that all other variables are held constant at their mean, a founder with 10 Facebook friends would have a 9% chance of succeeding, one with 100 friends would have a 20% chance of success, and one with 1000 friends would have a 40% chance of success.
Signals of quality also lead to success. Considering an average film project and holding all else constant, having no videos would result in a 15% chance of success, videos make the chance of success 37%. Overall, success is therefore linked to the quality of products, but also to the social networks of founders.
Geography plays an important role in the success of crowdfunding efforts. Having a local community of artists and creative individuals seems to increase the quality of projects produced by nearby founders.
