Dynamic strategies for successful online crowdfunding

Abstract

Crowdfunding is an emerging internet fundraising mechanism for soliciting capital from the crowd to support entrepreneurial ventures and innovative projects. Although the impact of network effect has been studied in the literature, the role of network effects in the presence of a funding target and deadline has not been well-understood by researchers and practitioners. We empirically investigate the dynamics of online crowdfunders' backing behaviors in the presence of network effect and a finite time window. Our model captures how investors dynamically update their expectations on the prospect of a project based on the current funding status of the project (e.g., amount of funding achieved and time elapsed/left). Our research provides guidance on how to design a crowdfunding campaign and help project owners decide when and how much to promote their project on social media to maximize the likelihood of funding success and the return on marketing investment.