The Future of Crowd-Funded Ventures
By Eliana Chow
New entrepreneurs are turning to online crowdfunding platforms in droves to amass support for their latest ventures, carefully crafting their pitches to appeal to a wide range of potential supporters.
The crowdfunding phenomenon has caught the eye of entrepreneurial researchers, who are using the wealth of data available to examine overall trends in crowd-funded ventures. In response to an influx of journal submissions on the topic, NC State University’s Jeff Pollack and co-editors from Entrepreneurship Theory and Practice composed an editorial article containing recommendations for channeling research efforts into novel and productive directions.
“It’s easy to identify correlations in large datasets, but much harder to generate theories behind what causes those patterns,” notes Pollack, a professor of entrepreneurship at the Poole College of Management. “We want to reveal where the research can go from here and help focus efforts on what will be most beneficial for entrepreneurs to apply in the crowdfunding space.”
We want to reveal where the research can go from here and help focus efforts on what will be most beneficial for entrepreneurs to apply in the crowdfunding space.
The co-authors of the editorial offer three key recommendations for researchers hoping to advance crowdfunding literature. First, it’s important to account for the year in which internet data was collected from crowdfunding websites. In an online space where interests and trends come and go, data and analyses from crowd-funded ventures in 2021 may not be relevant in 2022. “That reality only highlights the need to develop forward-looking theories,” Pollack says. “So far, most research in this space has been focused on making observations. From there, we need to use existing findings to hypothesize about what patterns we might see in the future.”
Second, the co-authors encourage researchers to consider the unique social context of individual crowd-funded projects. Crowd-funded ventures vary widely in terms of project size, target audience, project type, campaign platform, campaign length and types or number of interactions between the entrepreneur and their supporters throughout the campaign. Each variable opens the door for new research questions and field studies to predict the extent of a factor’s impact on crowd-funded venture success.
Finally, there is great potential for entrepreneurial insight in studying different types of crowdfunding. While some campaigns are reward-based, where donors receive a special t-shirt or other item in gratitude for their support, other campaigns promise a share in the profits if the venture is successful. Some even appeal to public investor groups rather than individuals. “Just because one entrepreneur is successful using a reward-based crowdfund does not necessarily mean another entrepreneur with a different project and social context will experience the same outcome,” Pollack explains.
By taking a deep-dive into new funding platforms and helping to finetune those tools, we have the opportunity to help lead new generations of entrepreneurs to success, and we’re only just getting started.
Considering these three recommendations, Pollack and his colleagues emphasize the need to develop long-term studies to track the impact of crowd-funded ventures after the initial campaign. Similarly, the co-authors suggest that academics and entrepreneurs would benefit from comparing the success of crowd-funded ventures to other types of funding environments like angel investing or venture capitalism. “I’m eager to see how researchers will rise to these new entrepreneurial frontiers,” Pollack concludes. “By taking a deep-dive into new funding platforms and helping to finetune those tools, we have the opportunity to help lead new generations of entrepreneurs to success, and we’re only just getting started.”
The paper, “Making a Contribution to Entrepreneurship Research by Studying Crowd-Funded Entrepreneurial Opportunities,” is published in Entrepreneurial Theory and Practice. The paper was co-authored by Jeffrey M. Pollack of North Carolina State University; Markku Maula of Aalto University; Thomas H. Allison of Texas Christian University; Maija Renko of DePaul University; and Christina C. Günther of WHU.
Note to Editors: The study abstract follows.
“Making a Contribution to Entrepreneurship Research by Studying Crowd-Funded Entrepreneurial Opportunities”
Authors: Jeffrey M. Pollack, North Carolina State University; Markku Maula, Aalto University; Thomas Allison, Texas Christian University; Maijia Renko, DePaul University; and Christina C. Günther, WHU.
Published: December 6, 2019, Entrepreneurial Theory and Practice
Abstract: This editorial outlines our perspective on the state of literature as well as suggestions for new contributions to entrepreneurship research in the area of crowd-funded opportunities. Our aim is, first, to outline what we see as best practices for research on crowd-funded entrepreneurial opportunities. Second, we aim to solicit additional articles for the Virtual Special Issue (VSI) on “Crowd-Funded Entrepreneurial Opportunities” in Entrepreneurship Theory and Practice. In contrast to typical editorial articles associated with special issues, we take a prospective approach and outline what we hope (and expect) to see in the literature in the future. Put differently, we are not going to summarize a subset of articles that have been accepted for publication—rather, we are going to delineate the subset of articles to be written that we would, ideally, like to see submitted to top-tier entrepreneurship journals in order to advance the literature. Along the way, we will describe best practices that we anticipate can elevate research in this burgeoning area of inquiry.