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How likely is your crowdfunding campaign to succeed?

Stats & Figures Update #2 (Article)

How likely is a crowdfunding campaign to succeed?

The simple answer is that it depends on the project, the platform being used and other factors related to the specifics of the campaign. While the media is full of extraordinary stories of success, the reality is that many if not most crowdfunding campaigns do not reach their ultimate funding goals. Indeed, according to Massolution’s 2013 Crowdfunding Industry Report, the global average success rate for crowdfunding campaigns in 2012 was around 50%.

Platform

There does appear to be some variance regarding the funding success rate on various platforms, but these rates can be quite hard to compare between platforms. While the overall success rate for projects hosted on Kickstarter is just under 44% (as of January 2014), a recent analysis of Indiegogo’s site (article here and raw data here) shows a somewhat lower overall success rate of 34% if only projects that received more than $500 in funding are included in the analysis – and drops to less than 10% if all projects are included.  

The discrepancy between these two platforms may stem largely from the difference in their funding models. Indiegogo will release funds even for partially funded projects, meaning that campaign owners are free to set very ambitious goals which may not be met. This practice may be driving up the number of unsuccessful projects. Indiegogo also has looser restrictions on what sorts of projects can be funded, which may encourage more speculative or riskier projects to appear on the platform.

Kickstarter campaigns, on the other hand, must reach their goal to receive any funds. This threshold requirement may also influence owners of Kickstarter campaigns to work harder to reach their objectives, or to set lower goals, as they will not receive any funding unless they are “completely” successful.

Indiegogo’s seemingly low success rate notwithstanding, larger, more established platforms with higher traffic tend to have higher success rates than smaller or emerging platforms, where a project might receive less exposure. For instance, Kickstarter’s current average success rate is just under 44%, whereas Rockethub, a smaller donation/reward crowdfunding platform, has an overall success rate of only 11%, as reported by crowdsunite.com.

Additionally, some platforms do extensive pre-approval or project curation, which can “artificially” inflate the success rate as many suboptimal projects may not receive approval. One such platform is the French-based Ulule which only accepts around 65% of applications, and thus can boast a total success rate of 54%.

We must thus remember to take comparisons of success rates between platforms with a grain of salt, as they are all slightly different. The overall success rate of a platform is affected by a large number of interacting variables: the size of the platform, its degree of pre-approval curation, the funding model (all-in or flexible), the campaign length, and the eligibility restrictions of the platform, to name a few.

Given the overall limited success rate, it is important to have a realistic understanding of the likelihood of success before committing the substantial time and effort necessary to run a crowdfunding campaign. Even with extensive research and preparation (see best practices), success is never guaranteed.

Recent research indicates that choice of platform may be the strongest factor influencing the potential success of a project.  Having said that, it is important to understand how other factors can impact your project’s chances.  Below, we have compiled information that outlines the different factors that may modify a campaign’s eventual success:

Crowdfunding model

Differing levels of perceived contributor risk and/or the accessibility of the model can have a significant impact on a crowdfunding model’s chance of success.

For example, the equity model currently suffers from an unstable legal framework and burdensome regulations in many jurisdictions, reducing its success rate although concerns about fraud in equity crowdfunding have thus far proven unfounded since there has not been a single instance of fraud across all six equity platforms monitored by thecrowdcafe.com, spanning more than 3,000 total successful investment rounds of financing.

On the other hand, according to Massolution, lending-based models tend to be very successful, with a 91% success rate, driven mainly by the popularity of micro-loans, which have the highest probability of success among all types of crowdfunding campaigns.

Finally, success rates of donation-based models (including rewards-based donation models), equity-based models and presale models range from 40% to 50%, between the two above “extremes”.

Type of project

Some types of projects are better suited to crowdfunding than others. Looking at the statistics published on Kickstarter’s website, Games projects hosted on the platform have about a 35% success rate and film and video projects have an almost 40% success rate. The project categories with the highest success rates on Kickstarter are dance (71%), theatre (64%) and music (55%). It should be noted, however, that dance and theatre projects represent a very small portion of activity on Kickstarter, both by number of projects and by total dollars raised. And one can argue that it’s easier to raise a few thousand dollars than several hundreds of them.

Momentum

One of the key success factors for a crowdfunding campaign is achieving and maintaining the right amount of momentum behind the campaign, especially in the early post-launch days. Indeed, according to statistics reported by Kickstarter, once a campaign raises over 20% of the initial funding goal, the project has an 80% chance of successfully reaching its total funding goal. Seedrs reports that once a campaign hits 30% of its funding goal the success rate climbs to 90% (compared to only 50% after a campaign reaches the 5% mark). And the faster the momentum is gained the better: campaigns that reach the 30% mark within the first week have a higher rate of success. To-date, Seedrs has seen a 100% success rate for projects once they raise 35% of their funding goal.

That said, the turning point for a campaign does vary by the size of the funding goal, according to analysis conducted by Professor Ethan Mollick and blogger Jeanne Pi. No surprisingly, the larger the funding goal, the higher the turning point will be. For example, projects with a funding goal of $100,000 or more need to reach 65% of their funding goal in order to increase their chances of success to 80%, whereas projects with a funding goal of $10,000 or less only need to reach 15% of their funding goal to increase their chances of success to 80%.

Exposure

Figures confirm the assumption: the more exposure your campaign receives, the higher the chances of success. And one of the best ways to get word out about your project is through social media. Mollick and Pi report that an average project with a social network of only 10 friends or followers would have a 9% success rate, whereas a project owner with a network of 1,000 friends or followers would increase that success rate to 40%.

In addition, getting featured by your platform of choice is a key success factor as it ensures additional exposure to keep your campaign’s momentum up. According to Mollick and Pi’s analysis, projects that are featured by Kickstarter have an 89% success rate, compared to an average 30% success rate for non-featured projects. The only catch is that your campaign needs to have enough momentum to start off with in order to become a featured project.

Campaign Length


Choosing the right length for a crowdfunding campaign is an important factor in its eventual success (or lack thereof). There is a trade-off between giving your audience sufficient time to engage with the campaign and losing momentum because of a timeline that is overly long, creating exhaustion or discouragement among the campaign team. At times, a longer campaign period can be associated with a decrease in the chances of success of that campaign. For example, an average project with a $10,000 funding goal will have a 35% chance of success if the campaign period is 30 days, whereas it will have only a 29% chance of success with a 60-day campaign period. According to insights released by Indiegogo, the optimal campaign length is 45 days.

 

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