This One’s Important — What Do Crowd Funding Investors Look for in a Company?

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For startups and entrepreneurs looking to explore crowdfunding opportunities, there is really only one concern: how to attract donors/pledgers (and let’s call them investors for simplicity sake, shall we) for your campaign.

A recent study, Swept Away by the Crowd? Crowdfunding, Venture Capital, and the Selection of Entrepreneurs, came to an interesting conclusion:  it found that crowdfunding investors look for many of the same attributes of potential success as your tried and true VC.

The study, conducted by Wharton School of Business Professor Ethan R. Mollick, analyzed 2,101 crowdfunded projects on Kickstarter.  He compared a number of key characteristics, including history of success of a projects, influence of endorsements, the level of preparation demonstrated by an entrepreneur, quality, social networks, geographic outcomes, and gender. He found that despite the differences in selection environment, investors assessed entrepreneurial quality in similar ways, focusing on factors like the quality of the product and the resume of the team members. The only notable difference he found was that crowdfunding alleviates some of geographic and gender biases associated with the way that VCs look for signals of quality.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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