How much do social connections matter in fundraising outcomes?

Abstract

This study examines the role of social connections and network centrality in attracting funders to crowdfunding campaigns. We classify social connections as either external (e.g., Facebook) or internal (e.g., investing in online platforms through resource exchange). Drawing from the 108,463 crowdfunding campaigns on the online platform Kickstarter from April 21, 2009, to July 24, 2019, we apply external linkages and online followers to estimate the effect of external social connections. We construct a digraph network for the internal social connections and use PageRank, HITS, and centrality to obtain the weights of the nodes. Next, we compare the performance change of several prediction algorithms by feeding social connection-related variables. This study has several findings. First, for external social connections, having more online followers improves the funding success rate of a campaign. Second, for internal social connections, only authority and degree in centrality positively affect the number of funders and the campaign’s financing progress among the weights of the nodes. Third, using social connection variables improves the prediction algorithms for funding outcomes. Fourth, external social connections exert greater funding outcomes than internal social connections. Fourth, entrepreneurs should extend their external social connections to their internal social connections, and network centrality expedites project financing. Fifth, the effect of social connections on fundraising outcomes varies among the campaign categories. Fundraisers who are online influencers should leverage their online social connections, notably for the project categories that matter.