Success Factors in Reward based and Equity based Crowdfunding in Finland

 
 

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Master’s Thesis 
26 
5. Success Factors of Crowdfunding 
In this thesis and study crowdfunding success is defined as a crowdfunding initiative 
that reaches or exceeds its original funding target. Funding target in this case means 
the amount of capital set as a goal for the campaign. Crowdfunding success and fail-
ure is determined by whether or not the project raises the target amount. Although 
raising for example 95% of the funding target could be considered a success by many, 
this thesis will not view such project outcomes as successful. This is because most 
crowdfunding platforms use an “all or nothing” rule, where no transfers of capital are 
executed if the full amount is not reached. Thus, even if a project were to reach 95% 
of its funding target, no capital would be collected. 
Though crowdfunding volumes have risen, most crowdfunding initiatives are not suc-
cessful. According to 
Mollick (2014), unsuccessful projects fall short of their target 
by large amounts while successful projects exceed their target by only small amounts. 
This would indicate that project legitimacy and interest is difficult to achieve. It also 
suggests that funders do not feel compelled to contribute to a project that has already 
met its target. High funding targets imply more effort is required from the entrepre-
neur to legitimate and create public interest in the project
(
Frydrych et al., 2014).
The aspects that impact the legitimacy or intrigue of a project are varied. Some of the 
researched success factors are related to the venture itself. The type of project affects 
the success of a venture – including whether the venture is non-profit or for-profit, as 
well as which field and industry the project is set in. The type and level of rewards 
given to contributors also affects success rates. (
Giudici et al., 2013) 
The entrepreneur and their actions also affect the potential success of the funding pro-
ject. The number of entrepreneurs taking part in the venture (
Frydrych et al., 2014) 
and their background has an effect on reaching the funding target (
Ahlers et al., 2015). 
Also, entrepreneur activeness plays a part in the success of a funding initiative (Xu et 
al., 2015). How well the entrepreneur describes the project to potential funder and 
how much money is invested into the project pitches impact its success (
Giudici et al., 
2013)
. 

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