The Role of Customer Investor Involvement in Crowdfunding Success

This is a review of the paper “The Role of Customer Investor Involvement in Crowdfunding Success” by Philipp B. Cornelius and Bilal Gokpinar (2018).


One of the greatest challenges for entrepreneurs is securing outside funding for their ventures. So nowadays, an increasing number of entrepreneurs turn to novel sources of funding for their projects. One of the most prevalent alternative ways of raising money is reward-based crowdfunding, where the project is financed by a vast number of small donations (Kraus et al., 2016). In return for their pledge, funders receive a reward which differs among projects and the size of the backer’s donation – for instance, the reward can be receiving the product before it enters the market, purchasing it at a discounted price, or even an exclusive dinner with the project creators themselves (Mollick, 2014).

The obtaining of funds through crowdfunding is usually done via platforms such as Kickstarter. Kickstarter is the largest reward-based crowdfunding site, and since its launch in 2009, almost 160,000 projects have been successfully funded with the help of over 16 million backers (Kickstarter, 2019). In addition to collecting funds, project creators are drawn to crowdfunding platforms to get access to potential customers, gain an initial impression of demand, sell their goods and gain feedback from funders. Funders on the other hand, in addition to accessing an investment opportunity, gain early access to new or exclusive products, and may feel as though they belong to a community or philanthropic cause (Tsekouras, 2019).

Theoretical Background

Reward-based crowdfunding is characterised by a unique role of customers co-financing the project. In a traditional buyer-seller context, customers purchase a finished product, and the only information asymmetry they need to take into account is an inaccurate or misleading product description. However, when participating in a crowdfunding campaign, as funders, customers support the production of a product that is usually in a prototype phase or does not exist yet. They take on the risk of a product being different than promised, or not produced at all, for a promise of a future reward. As a result, they turn into customer investors – as they invest in a product in order to receive benefit at a later stage – and a buyer-seller relationship transforms into a principal-agent relationship where customers act as principals, and project creators as their agents (Cornelius & Gokpinar, 2018). In this case, it is possible that customer investors actually provide some of the benefits and support received from institutional investors.   However, the effect of this relationship shift remains unclear: do customers, as investors, really impact funding success apart from backing it financially? Can project creators actually benefit from customer inputs?

The Study

This paper has attempted to answer these questions by conducting a study based on 21,491 crowdfunding projects on Kickstarter, both successful and unsuccessful, over a 7 month period. The authors investigate the effects of customer input (measured in number of comments provided in the comments section of the project) on the success of crowdfunding campaigns – i.e. whether or not the funding goal was reached. They also investigate the moderating roles of a project’s team composition and backer’s distant funding experience, as well as the mediating role of the number of project revisions. To account for potential confounders, the authors also included the following antecedents of success as control variables: number of videos in the project description, the project’s riskiness, whether or not the project is run by an incorporated organisation, a project’s funding goal, previous user engagement and project category.

The authors found that customer involvement, measured in number of comments submitted in the comments section, indeed increases a project’s probability of funding success (seen in Figure 1). In fact, they found that as few as 3 messages from customers increase the average likelihood of funding from 8% to 58%. One of the explanations for this may be the fact that incorporating customer suggestions make the product more customer-adapted, therefore pulling more backers to the project.

Figure 1: Predicted likelihood of funding success at different levels of customer input and distance

Surprisingly, this paper also demonstrates that the input of donors with distant funding experience – that is, backers that have also supported projects from different categories – is particularly beneficial for the success of the project (seen in Figure 1). Intuitively, it would be expected that the feedback of experts in a particular area is more insightful; however, this result may stem from the fact that the donor’s novel, out-of-the-box thinking can suggest solutions that experts from the field may not have ever considered.

The authors also found that individual project creators benefit more from backers’ suggestions than teams project creators, because individual entrepreneurs rely more heavily on mitigating agency costs through customer involvement. Lastly, it was found that the positive influence of customer input on project success is greater when the project creator updates the projects description while the campaign is active (seen in Figure 2). Indeed every project revision was found to increase the likelihood of funding success by 40%.

Figure 2: Predicted likelihood of funding success at different levels of project revisions


A strength of this study lies in its large, comprehensive and unique data set from Kickstarter. This data set includes 21,491 projects, from 138 countries and all 13 project categories. Furthermore, whereas most other studies in innovation have researched only successful projects, this paper uses a balanced set of both successful and unsuccessful projects, thus reducing selection bias (Singh & Fleming 2010; Chatterji & Fabrizio 2011). A dataset such as this one, increases the generalisability of this study’s findings to a diverse set of industries and entrepreneurs.

Another strength of this study is their inclusion of several control variables and an instrumental variable – the release of the Kickstarter mobile app – to improve the validity of their findings. Nine control variables are deployed to account for confounding factors, which cause spurious associations between independent and dependent variables, to ensure that the effect on funding success is likely due to changes in customer investor input (Skelly, Dettori & Brodt, 2012). Furthermore, the instrumental variable reduces the effect of possible endogenous variables, and helps account for unexpected behaviour between the variables creator ability and project quality (Lousdal, 2018).

Managerial Implications

This study not only contributes to earlier academic literature on crowdfunding, but also has direct implications for entrepreneurs, as the findings demonstrate that customer investors can provide some of the support usually received from venture capitalists or angel investors.

Firstly, given the findings that customer investor involvement and input can improve a projects chances of success, entrepreneurs should be open to customer investor’s feedback and actively listen to their suggestions – as this could be the difference between project success or failure. Additionally, as projects have been found to get better as more customer input is incorporated, entrepreneurs should actively change their product descriptions in response to them. When a funding goal has been reached, campaign descriptions can no longer be updated, so it is imperative that project creators incorporate relevant inputs as soon as they are suggested.

Furthermore, although perhaps slightly counterintuitive, entrepreneurs should value the inputs of customer investors with experience in distant categories, as their heterogenous insights could bring considerable value to the project. Lastly, the findings suggest that individual (as opposed to team) project creators may actually reap more benefit from customer investor input and thus should be more open to inputs when interacting with customer investors on the platform.

Chatterji, A.K. & Fabrizio, K., 2011. How Do Product Users Influence Corporate Invention? Organization Science, 23(4), pp.971–987.

Cornelius, P. and Gokpinar, B., 2018. The Role of Customer Investor Involvement in Crowdfunding Success. Management Science, Forthcoming.

Kickstarter (2019). About — Kickstarter. [online] Available at: [Accessed 1 Mar. 2019].

Kraus, S., Richter, C., Brem, A., Cheng, C.F. and Chang, M.L., 2016. Strategies for reward-based crowdfunding campaigns. Journal of Innovation & Knowledge, 1(1), pp.13-23.

Lousdal, M.L., 2018. An introduction to instrumental variable assumptions, validation and estimation. Emerging themes in epidemiology, 15(1), p.1.

Mollick, E., 2014. The dynamics of crowdfunding: An exploratory study. Journal of business venturing, 29(1), pp.1-16.

Singh, J. & Fleming, L., 2010. Lone Inventors as Sources of Breakthroughs: Myth or Reality? Management Science, 56(1), pp.41–56.

Skelly, A.C., Dettori, J.R. and Brodt, E.D., 2012. Assessing bias: the importance of considering confounding. Evidence-based spine-care journal, 3(01), pp.9-12.

Tsekouras, D., 2019. Customer centric digital commerce: Crowdfunding & Consumer-Driven Pricing [PowerPoint slide]. Retrieved from Blackboard.

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