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What drives the success of crowdfunding campaigns?

Some time ago, Andrea Di Pietrantonio from Invesdor sent me the following message on Facebook:

“There might be some regression or factor analysis to do on the pitches to highlight variables that make them successful or not.”

I took the challenge, and what started out as a minor piece of analysis is now turning into a series of several academic articles constructed in cooperation with Invesdor.

The first article, titled “Success drivers of online equity crowdfunding campaigns” addresses the research question that Andrea so aptly formulated. The question is highly relevant, as a large part of crowdfunding campaigns – both on Invesdor and on other platforms – have not reached their funding targets. Could something be done to increase the probability of a campaign succeeding?

When I, together with professors Jyrki Wallenius, Hannele Wallenius, and Jeffrey Teich, started to tackle the question, we first took the most obvious-seeming approach: We looked at the investment criteria used by more traditional early-stage investors – most importantly, business angels.

We asked an expert to familiarize himself thoroughly with all the campaigns that had been conducted via Invesdor and to give ratings along these investment criteria for each campaign. For example, a (hypothetical) campaign might have been given a full 5 for the team and the market of the target company, 4 for the product concept and the scalability of the solution, 3 for the deal terms, and a modest 1 for the company’s stage.

“Easy!” we thought, and started crunching the data.

Not so easy. None of these six investment criteria turned out to be statistically related to either the number of investors or to the total amount raised in a campaign. We also looked at the financials and valuation multiples of the target companies to see how they would be related to campaign success. Again, no relation.

“What now?” we asked ourselves. “If traditional investment criteria, financials, or multiples don’t drive campaign success, what does?”

We then decided to turn to more easily observable and more tangible features of crowdfunding campaigns. Indeed, this proved to be the right track. Based on sixty campaigns that had been conducted via Invesdor, we found the following:


1.  Campaign characteristics that are pre-determined by the target company – with assistance from Invesdor – are relevant in determining the campaign’s success:

  • The lower the minimum investment requirement, the more investors and funds a campaign can be expected to attract. Investors may be discouraged by larger investment requirements both because of the higher need for available liquid funds and because of the potential risk of losing the investment.
  • Campaign duration is negatively associated with the number of investors. Shorter durations may convey an indication of the target company’s decisiveness and ability to deliver. When faced with shorter campaigns, prospective investors may also be encouraged to act fast, rather than postpone the investment decision.
  • Higher funding targets seem to attract larger numbers of investors. Why? Well, investors may be somewhat more interested in campaigns that have higher targets, because larger amounts of funds collected enable companies to take more substantial measures towards growth. Higher targets may also provide prospective investors confidence to invest, as the campaign will only go through if sufficiently many others choose to support it with sufficient funds.
  • The availability of financials in the pitch is positively associated with the number of investors. Reporting some income statement data and forecasts may be considered a sign of credibility and capability.


2. The use of the entrepreneur’s (and Invesdor’s) networks is important for campaign success.

  • The more money the target company can raise through its and Invesdor’s private networks during the hidden phase, the more investors and more funds it is likely to attract in total. A large base of investments made early on may be a sign of credibility and give prospective investors confidence.
  • Posting the campaign on social media is a strong predictor of success. This may even have a direct effect on investments, as fans may follow the link and proceed to invest.


3. The understandability of the target company’s products may play a role in success

  • The results indicate that companies that offer consumer products, rather than products targeted to other businesses, may be more likely to conduct successful campaigns. Consumers may be more comfortable investing in products that they know or understand.


Overall, the results can be considered to be good news for entrepreneurs who are setting up campaigns, as many of these features are such that they can influence – even relatively effortlessly – themselves.

The results presented here are based on an aggregate assessment of campaigns and investments. But do all of Invesdor’s investors think along similar lines, or could they represent several different subgroups? Perhaps some are more interested in return potential, and traditional investment criteria, whereas others invest more out of a willingness to be part of the phenomenon behind the target company? We will dig deeper into this in our next article, which will be based on an investor survey that was conducted via Invesdor last autumn.

We are looking forward to further interesting findings!

Anna Lukkarinen, Doctoral candidate at Aalto University School of Business

Reference: Lukkarinen, A., Teich, J. E., Wallenius, H., & Wallenius, J. (in press). Success drivers of online equity crowdfunding campaigns. Decision Support Systems.

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