Online crowdfunding provides startups with an opportunity to raise funds from a large number of contributors (backers), in which each individual furnishes a very small amount of money. While entrepreneurs use peer-to-peer lending (lending-based), donation-based, rewards-based, equity-based, and profit-sharing as the most common forms of online crowdfunding, many campaigns remain unfunded and are unable to reach the intended target. To respond to this problem, it is, therefore, necessary to identify success factors in crowdfunding. Thus, the form of technologies that help platforms to consider identified success factors is crucial. This chapter provides an overview of different types of crowdfunding financing. The success factors that impact the main players of crowdfunding are identified. The chapter shows how adopting artificial intelligence (AI) technologies affects crowdfunding success.
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The number of small and medium-sized enterprises (SMEs) grows every year. According to Clark (2021), the number of SMEs worldwide increased by 174.89% within 20 years (from 121.78 million firms in 2000 to 212.98 million companies in 2020). The US Small Business Administration report shows that only in United State, there are 30 million small companies that employ 47.8% of total employees (Horne, 2022). Although job creation and innovation of SMEs have a huge impact on world economies, most companies remain unfunded in their early stage (Zhao, Harris, & Lam, 2019) or in their entire life cycle.
New firms encounter difficulties in attracting external financial institutions to obtain bank loans or capital either due to a lack of financial value (backup) or unsuccessful attempts to persuade investors. They waste a tremendous amount of time allocating seed capital through angels and venture capitalists. According to the Department for Business, Innovation and Skills (BIS) in the UK, less than 50% of small businesses are able to furnish any type of external funding for their company through bank loans, credit cards, or mortgages (Zhao et al., 2019). Indeed, financing new startups has traditionally been one of the most challenging tasks for entrepreneurs, because only limited firms have access to large private investments (Burtch, Hong, & Liu et al, 2018; Kauffman & Ma, 2015). To overcome these problems, new founders looked for an innovative and different form of financing called crowdfunding (Belleflamme, Lambert, & Schwienbacher, 2014).
Crowdfunding refers to a form of fundraising in which individuals who are interested in a specific business pledge a small amount of money to support that business (Belleflamme et al., 2014; Smith, 2021; Zhao et al., 2019). The wide range of accessibility and ease of use are two basic reasons to fasten the growth of the crowdfunding industry (Zhao et al., 2019). This became a favorite type of financing for new and small businesses. Although it is a low-cost alternative to more traditional financing resources such as banks and venture capitalists (Wachira & Wachira, 2021), many businesses are not able to raise their intended funds (Lukkarinen et al.; Zhu, 2022). It is therefore necessary to identify the factors associated with the success and failure of a project on crowdfunding platforms.
On the other hand, the main roles of crowdfunding platforms are to attract potential backers, start and facilitate interactions between fundraisers and funders, and promote upcoming campaigns. Thus, an effective marketing strategy to attract backers and turn them into loyal members (Ryu & Suh, 2021) is essential for the platform's growth and sustainability. Therefore, it is necessary to adopt technologies that are able to perform the abovementioned tasks. To address these issues, scholars and industry can apply Artificial Intelligence (AI) tools to crowdfunding's day-to-day process. Artificial Intelligence can be defined as “a system’s ability to interpret external data correctly, to learn from such data, and to use those learnings to achieve specific goals and tasks through flexible adaptation” (Kaplan & Haenlein, 2019).
This chapter is a survey of current literature related to crowdfunding, its success factors, and the use of Artificial intelligence (AI) in the crowdfunding industry. The chapter extracts 30 success factors from current academic studies and explores the findings of each paper and what each paper discusses about these factors.
The rest of the paper is organized as follows. The next section presents an overview of the crowdfunding industry. Then, several types of crowdfunding are discussed. After that, the authors provide literature on crowdfunding's success factors. Finally, the use of AI in crowdfunding is discussed and the conclusion is in the last section.