Understanding the Overfunding in Crowdfinancing: The Elements of Attractiveness

Abstract

Crowdfunding projects are subject to the evaluation of the online community, which participates in the financing process on an entirely voluntary basis. This unique feature of crowdfunding increases the importance of project’s owner communication and presenting skills to increase project attractiveness to its target group of recipients. In the all-or-nothing crowdfunding model, most of the projects that have successfully gained financing exceed the financial goal by only a small amount, which makes them only slightly overfunded. However, a limited number of projects have enticed a relatively high number of people into financing them, and, as a result, these projects are strongly overfunded. Based on a unique dataset of 814 overfunded projects, we investigate the drivers of the overfunding success stories. Along with standard statistical measures, we conduct logit regressions. Our results give evidence that the lower the requested amount and the higher the number of supporters, the higher the probability becomes that the project will be strongly overfunded. Moreover, our findings confirm that an active attitude of the project’s owner, as seen through news reports and previous project experience, and crowd participation, as seen through the number of comments, have the positive influence on the probability of a higher overfunding rate.