A new study demonstrates that when it comes to crowd-funding, being different is essential.
This is important, because it had been assumed that being very different could be a disadvantage – meaning that, if people couldn’t understand your proposition, then they wouldn’t invest.
That turns out not to be the case when it comes to crowd-funding, although the authors suggest it probably does apply when it comes to attracting more risk-averse venture capital. The study, which analysed 28,425 crowdfunding campaigns, shows that highly distinctive products attract 32% more backers and 47% more funding than me-too products. But the power of distinctiveness is even greater in a crowded marketplace. A stand-out idea in a well-established, familiar market could gain as many as 8 times more backing than a me-too idea.
Distinctive ideas don’t even need to make claims of community benefits to attract backers – being different is enough to maximise funding opportunities.
That said, ideas that come with substantial claims of community or societal benefits, even if they are not particularly distinctive, are almost as highly backed and funded.
The authors suggest that the findings may be generalisable to any situation in which large numbers of propositions are being compared such as corporate innovation competitions, startup contests or pitch-fests.
The bottom line is, if you’re going for crowd-funding, have a distinctive product or make substantial claims of community benefit or both. On the other hand, if your goal is attracting venture capital, don’t try to stand out too much.
Taeuscher, K., Bouncken, R., & Pesch, R. 2021. Gaining Legitimacy by Being Different: Optimal Distinctiveness in Crowdfunding Platforms. Academy of Management Journal, 64(1): 149–179.