Study: Having a Prominent Backer for a Crowdfunding Project Reduces Effectiveness

By:
Chris Gaetano
Published Date:
Aug 20, 2021
crowdfunding_hp

While some might think that getting a prominent person to back a crowdfunding project would be beneficial, a recent study found that it actually reduces the campaign's effectiveness. The study, conducted by researchers from Indiana University, the University of Connecticut, and the National University of Singapore, used data collected from 2,021 ideas on a prominent crowdfunding platform. 

What they found was that, contrary to what some might believe, it is in fact not a good idea to rely on prominent backers who network with others of their ilk on other crowdfunding campaigns. Kelly Herd, one of the researchers, summarized the results, saying, “We find that when backers have prior affiliations, in other words, co-backing relationships, it decreases the amount of funds raised by the crowdfunded idea." 

After conducting a series of interviews about the phenomenon, the researchers said it occurred because of what they refer to as "vicarious moral licensing." In other words, because a prominent person backs the project, people believe the project needs less help than ones without such endorsements. As a result, they are less likely to back the project themselves, for they assume that someone is already helping more than they could. 

“Based on our findings, we recommend that creators on crowdfunding platforms refrain from generating support from backers who are affiliated with many others on the platform. Trying to add more backers helps, but when such backers have prior affiliations, it hurts,” said Vishal Narayan, another one of the researchers.

Crowdfunding platforms should increase the number of backers and refrain from extensive social messaging because such community efforts might have a dark side effect.

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