While it’s tempting to think of the great breakthroughs of our time as being revolutionary breaks from what has been before, the reality is far more in keeping with Isaac Newton’s famous statement that he had merely “stood on the shoulders of giants.”  This ability to build upon what has gone before is the bedrock of successful innovation, so it’s perhaps no surprise that research from the University of Alberta suggests it’s equally crucial for successful crowdfunding.

The research finds that successful crowdfunders often built upon ideas of previous projects that had just fallen short of their fundraising goals, with these seemingly more successful than ideas that built upon projects that had only marginally surpassed their goals.

“There is this sense that past entrepreneurial successes somehow have a spillover effect, a tide that lifts all boats and helps future entrepreneurs, but that has been very difficult to test,” the researchers say.

Past performances

Across a range of crowdfunding platforms, the researchers assessed the role past performance had on future projects.  The inspiration came from the Double Fine Adventure video game, which raised millions of dollars more than its original target in its 2012 campaign on Kickstarter.  It was a success that saw other hugely successful campaigns for video games appear shortly afterwards.

The community pondered whether these huge successes were stealing backers from smaller creators, but the analysis found that the opposite actually happened.  The researchers trawled through around 182,000 campaigns across 165 categories, ranging from board games to restaurants, to see what effect the varying levels of success had on subsequent campaigns.

The data revealed a number of clear outcomes:

• Broken path failures, which are campaigns that never get above 20 percent of the goal
• Path-breaking failures, which are those efforts that fall just short of their goal
• Unsung successes, which are campaigns that achieve their monetary goals but little to no more
• Blockbuster successes, which are campaigns that get 150 percent or more of what they wanted.

The best strategy appeared to be following into a category that had recently experienced a blockbuster success.

“If category X had lots of blockbuster successes, the campaigns that come along after those, all else being equal, are more likely to succeed because they’re in a place where there’s a lot of enthusiasm and interest for what’s going on,” the researchers explain.

Building on failures

That’s a largely intuitive finding, but one would assume the second most effective category would be that with a number of unexpected successes, but that wasn’t the case, with those containing path-breaking failures more influential.

The researchers draw a comparison with the mobile app ecosystems, where the tremendous growth in the number of apps resulted in “app fatigue” among investors.

This meant that campaigns that only just missed their funding goals are actually beneficial, as backers pledged their support to an idea which ultimately failed were more likely to dip back into the market again for similar ventures.

“The fact that the game came so close may inspire backers to pledge their support to other campaigns,” the researchers say. “Waiting there is this ready base of backers that the next set of entrepreneurs can draw on, a community that’s already been built.”