Return on entrepreneurial passion: A study of funding success and timely delivery in crowdfunding

A Work Project, presented as part of the requirements for the Award of a Masters Degree in Management from the NOVA – School of Business and Economics

Entrepreneurship is fundamental to innovation and economic growth. As new ventures are in need of outside capital and traditional sources such as VCs, banks and business angels are scarce, some entrepreneurs directly “tap” the crowd of consumers instead. Crowdfunding entrepreneurs make use of the ongoing extension of the consumer’s role, which by now also includes being project financiers. Many consumers are enthusiastic about the projects to which they financially and otherwise contribute. Passion is also most central to entrepreneurship. Passionate entrepreneurs create better performing ventures and are able to attract more outside capital from traditional sources of new venture funding. Drawing on publicly available data of 255 Kickstarter projects with an aggregated investment sum of over $8 m, I investigated whether passion influences a project’s odds to deliver promised rewards to investors on time, and whether investors looked for signs of passion when making investment decisions. I differentiated between signs of affective and cognitive passion. Results are intriguing. They show that cognitive, not affective passion is significantly related to funding success, while the interaction between cognitive passion expressed through early updates and entrepreneurial experience is linked to timely delivery. In general, the results support the idea of the “wisdom of the crowd”: Crowdfunding investors appear to be rational and comparable to traditional investors in their investment decision making criteria. The results further support the differentiation between affective and cognitive passion. They also indicate a potentially big gap between the real passion an entrepreneur experiences and the passion he expresses. Simultaneously, the study informs entrepreneurs, investors and operators of crowdfunding platforms in regard to how they can better benefit from crowdfunding.