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Crowdfunding has become a popular way for entrepreneurs and creators to raise funds for their projects. However, not all crowdfunding campaigns are created equal. Some projects receive significantly more funds than initially targeted, a phenomenon known as overfunding. But what makes these projects so successful? A recent study sheds light on the determinants of overfunding in reward-based crowdfunding.
According to the study, there are three phases that differentiate characteristics ascribed to the crowd, the project, and the communication in overfunded crowdfunding projects. In the first phase, the crowd is attracted to the project due to the project founders' reputation and experience. In the second phase, the core target group contributes to creating a hype around the project, leading to a positive impact on project success. Finally, in the third phase, network effects come into play, attracting a broader audience to the project.
The study also found that the language used in the project description and communication with potential backers plays a crucial role in overfunding. Positive language, such as emphasizing the potential benefits of the project, can significantly increase the chances of success. As the study notes, "The power of positivity? The influence of positive psychological capital language on crowdfunding performance."
However, it's not just about the language. The study also highlights the importance of the project's uniqueness and innovation. Projects that offer something new and exciting are more likely to attract backers and receive more funds.
The study also found that the size of the funding goal is not a significant predictor of overfunding. In other words, projects with smaller funding goals are not necessarily more likely to be overfunded than projects with larger funding goals. This finding challenges the common assumption that smaller funding goals are more attractive to backers and more likely to be overfunded.
In conclusion, what makes some crowdfunding projects overfunded is not about the funding goal, but about the project’s reputation, communication, and innovation. Overfunded projects not only raise more money, but also build a strong community of backers.
