Dynamic Strategies for Successful Online Crowdfunding

Zhuoxin Li () and Jason A. Duan ()
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Jason A. Duan: McCombs School of Business, The University of Texas at Austin, 2110 Speedway Stop B6700, Austin, Texas, 78712

No 14-09, Working Papers from NET Institute

Abstract: Crowdfunding is a fast emerging internet fundraising mechanism for soliciting capital from the crowd to support entrepreneurial ventures. This paper empirically investigates the dynamics of investors’ backing behaviors in the presence of network externalities and a finite time window. The proposed model captures how investors dynamically update their expectations on the prospect of a project based on its current funding status and time progress. Model estimation shows that investors are more likely to back a project that has already attracted a critical mass of funding (positive network externalities). For the same amount of achieved funding, the backing propensity declines over time (negative time effects). These two opposing forces give rise to a critical mass of funding the project must attain on time to achieve successful funding by the deadline. Counterfactual simulations show that projects may fail to attain the critical mass because of unfavorable shocks in investor visits at the early stage of the funding cycle. We derive dynamic seeding strategies for project owners to maximize the likelihood of funding success.

Keywords: crowdfunding; group buying; entrepreneurship; network externality; hazards model; Bayesian inference (search for similar items in EconPapers)
JEL-codes: C81 D12 L26 L86 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2014-09
New Economics Papers: this item is included in nep-cse, nep-ent, nep-ict, nep-net, nep-ore and nep-ppm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (17)

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