Does the crowd mean business? An analysis of reward-based crowdfunding as a source of finance for start-ups and small businesses

Reward-based crowdfunding has been widely heralded as a novel mechanism by which start-ups can access seed funding, theoretically allowing the circumvention of traditional intermediaries, such as banks and venture capitalists. Our study makes a unique contribution to the emerging research on this topic by presenting detailed empirical evidence on reward-based crowdfunding, focusing on the performance of business-related campaigns relative to campaigns in other funding categories. Our findings suggest that reward-based crowdfunding is unevenly distributed and that success is concentrated within a small number of platforms and campaigns. Evidence from a series of multiple regressions also suggests that business-related crowdfunding campaigns perform poorly compared to those in other categories, particularly those in creative areas such as music and dance. These findings question the extent to which reward-based crowdfunding is a means by which significant numbers of start-ups can bridge the gaps left by mainstream finance.