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How Successful Are Crowdfunded Ventures?

Many people are trying crowdfunding sites hopes of getting projects off the ground—but how realistic are those hopes?

It’s surprisingly hard to find data on this, but my findings suggest that about 40% of projects actually achieve their funding goals. That’s based solely on data from Kickstarter which has been independently verified (if unscientifically). Reaching a fundraising goal is also a loose definition of success, but at least it’s possible to quantify.

I browsed IndieGoGo’s site and searched their blog for information on success rates, but came out empty-handed. They’re happy to tell you that the probability a campaign will reach its goal doubles once the first contribution is received, but they don’t disclose the probably that any campaign will succeed, which is necessary for context. E.g., if the overall success rate is 5%, then a campaign with a single contribution has a 10% success rate. Alternatively, if the overall success rate is 20%, then with one contribution your chances jump to 40%. That base value makes a big difference!

There are other tips for radically increasing the success of your fundraising effort, but which seem like common traits of good ideas with lots of support. Examples include the fact that campaigns with 2 or more people working on them raise 80% more money than those with only one person, or that 87% of campaigns that reach their goal exceed it.

I’d be a hypocrite if I didn’t provide some background data on the overall success rates of startups, so here it is, as best as I can sort out from conflicting reports. 25% of all startups fail within a year and 60% fail within 6 years. Now, those are 15-20 year old numbers, and you should temper them with the fact that technology was very different then. Your average startup looks a lot different these days. There’s also the problem of defining success and failure so that the numbers aren’t over-inclusive or under-inclusive.

With the pending proposal to allow crowd-investors to take equity (shares of stock) in crowdfunded ventures, should these kinds of statistics be among the required disclosures of the risks of investment on crowdfunding sites? If I were an investor, I'd like to know what the rough odds are that my money will just disappear into a failed venture!

Contact the author here, and follow @Revolve_This and @gerritbetz on Twitter.