"It's never too late: funding dynamics and self pledges in crowdfunding"

Paolo Crosetto and Tobias Regner

Crowdfunding recently emerged as an alternative funding channel for entrepreneurs. We use data from Startnext, the biggest German platform, to gain insights on funding dynamics and pledgers' motivations. We find that the majority of projects that eventually succeed are not on a successful track at 75% of their funding period. These late successes are boosted by information cascades during the final 25% of the funding duration. We conclude that project success is only partially path-dependent. While early pledges do anticipate project success, a lack of them does not necessarily mean that projects will fail. Moreover, we quantify the extent of self funding (1.6% of all pledges). Although self pledges account for about 9% of all pledges that secure funding, the late surges at severely under track projects are mostly driven by external funders. Furthermore, we find no evidence of subsequent herding triggered by self pledges.

Working paper

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