Technology

Posted on October 6, 2017 by staff

What to avoid saying if you’re crowdfunding

Technology

Crowdfunding campaigns are less likely to be successful if products are described as both useful and novel, a new study has found.

A recent big-data analysis of more than 50,000 Kickstarter projects, led by researchers from the Singapore Management University, HEC Paris, the University of Technology Sydney and INSEAD, found that describing a product as either useful or new is the best way to attract the largest crowdfunding.

Crowdfunding campaigns are less likely to be successful if products are described as both useful and novel, a new study has found. The findings show that the community does not view claims of both as congruent, and that the total amount pledged takes a 26 per cent hit when both words are used.

“When projects make both claims, backers either assume a product’s benefits are inflated, that it carries a high risk of failure or that it divides the crowd between believers and sceptics, making it hard for backers to pick a side,” Amitava Chattopadhyay, professor of marketing and the GlaxoSmithKline chaired professor of corporate innovation at INSEAD, said.

Chattopadhyay and his study co-authors accessed a dataset comprising all the projects listed on Kickstarter since its launch in 2009.

The final dataset included a total of 50,310 projects. Machine-learning tools were used to extract a list of descriptors from the text, lead image and video of each project. The number of occurrences of the word “novel” and its synonyms served as a proxy for novelty claims. Conversely, the sum of occurrences of the word “useful” and its synonyms became the measure for claimed usefulness.

These numbers were then compared with the individual projects’ funding results.

The data showed that claims of novelty and usefulness, taken separately, do increase the total pledge amount. A single claim of novelty increases project funding by about 200 percent, while a single claim of usefulness leads to an increase of about 1,200 percent, when compared to projects devoid of any such claim.

Anirban Mukherjee, assistant professor of marketing at Singapore Management University, described the findings as “deeply disappointing” as the premise of crowdfunding is to support creativity and innovation.

Cathy Yang, assistant professor of marketing at HEC Paris, added: “The higher level of uncertainty in the crowdfunding context drives backers to choose modest innovations and shy away from more extreme innovations.”