The Value of Completing Crowdfunding Projects

Crowdfunding systems are social media websites that allow people to donate small amounts of money that add up to fund valuable larger projects. These websites are structured around projects: finite campaigns with welldefined goals, end dates, and completion criteria. We use a dataset from an existing crowdfunding website — the school charity Donors Choose — to understand the value of completing projects. We find that completing a project is an important act that leads to larger donations (over twice as large), greater likelihood of returning to donate again, and few projects that expire close but not complete. A conservative estimate suggests that this completion bias led to over $15 million in increased donations to Donors Choose, representing approximately 16% of the total donations for the period under study. This bias suggests that structuring many types of collaborative work as a series of projects might increase contribution significantly. Many social media creators find it rather difficult to motivate users to actively participate and contribute their time, energy, or money to make a site valuable to others. The value in social media largely derives from interactions between and among people who are working together to achieve common goals. To encourage people to participate and contribute, social media creators regularly look for different ways of structuring participation. Some use a blog-type format, such as Facebook, Twitter, or Tumblr. Some use a collaborative document format like Wikipedia. And some use a project-based format. A project is a well-defined set of tasks that needs to be accomplished. Projects usually have a well-defined end goal — something that needs to be accomplished for the project to be considered a success — and an end date — a day by which the project needs to be completed. Much work in society is structured around projects; for example, Hollywood makes movies by organizing each movie’s production as a project, hiring a new crew for each movie. Construction companies organize their work as a sequence of projects. And projects are common in knowledge-work based businesses (?).  Another important place we see project-based organization is in crowdfunding websites. Crowdfunding is a relatively new phenomenon that merges modern social web technologies with project-based fundraising. It is a new form of social media that publicizes projects that need money, and allows the crowd to each make a small contribution toward the larger project. By aggregating many small donations, crowdfunding websites can fund large and interesting projects of all kinds. Kickstarter, IndieGoGo, Spot.Us, and Donors Choose are examples of crowdfunding websites targeted at specific types of projects (creative, entrepreneurial, journalism, and classroom projects respectively). Crowdfunding is becoming an increasingly popular tool for enabling project-based work. Kickstarter, for example, has raised over $400 million for over 35,000 creative projects, and Donors Choose has raised over $90 million for over 200,000 classroom projects. Additionally, crowdfunding websites represent potential new business models for a number of industries, including some struggling to find viable revenue streams: Sellaband has proven successful in helping musicians fund the creation and distribution of their music; and Spot.Us enables journalists to fund and publish investigative news. In this paper, I seek to understand why crowdfunding systems that are organized around projects are successful. Using a dataset from Donors Choose, a crowdfunding charity that funds classroom projects for K–12 school teachers, I find that completing a project is a powerful motivator that helps projects succeed in the presence of a crowd: donations that complete a project are over twice as large as normal donations. People who make these donations are more likely to return and donate in the future, and their future donations are larger. And few projects get close to completion but fail. Together, these results suggest that completing the funding for a project is an important act for the crowd, and structuring the fundraising around completable projects helps enable success. This also has implications for other types of collaborative technologies.