What does the wealth distribution of crowdfunding look like? | MIT Center for Civic Media

What does the wealth distribution of crowdfunding look like?

To get noticed as a crowdfunding campaign in 2013, you need to aim high. Three years ago, topping $345,000 would have made you the biggest Kickstarter of all time. In the past year and a half, the platform has gone from zero to fifty-one successful $1M+ campaigns. Long gone (and thankfully so) are the days when simply running a campaign was enough to generate media interest. Now mainstream attention demands a much higher profile, and therefore a much higher price tag: from Veronica Mars to Spike Lee and Pebble.

While these large projects are a powerful proof of concept - that crowdfunding can think very big - they are a minority story. Kickstarter's published data tells us that in every category the most common amount raised is between $1,000 and $10,000. Million-dollar projects account for just 0.1% of the total number of successful campaigns.

But the share of overall funds raised that is going to big-money projects is increasing rapidly. I've been doing some analysis of Kickstarter projects and have found that, in the aggregate, the amounts raised are disproportionately clustered around large projects. Kickstarter's top 0.1%, 51 $1M+ projects, account for 15% of the total money collected in the platform's history. In other words, roughly every seventh dollar ever given to a successful Kickstarter project went to a million-dollar campaign. Economists would term this an increase in the Herfindahl Index, suggesting a growth in market power, but a decrease in competition. Perhaps we shouldn't be surprised at all: it's a movement towards the Pareto curve, or 'long tail', something that is especially common in online markets.

We see that the concentrations are more pronounced in some categories. Video games shows the largest concentration of big money campaigns, partly because it's by far the biggest supplier of them (27 successes): a whopping 41% of money raised for video games went to $1M+ projects. In photography, technology and design, $1M projects absorbed between 15% and 17% of the total raised, even though big projects accounted for less than 0.3% of the total number of projects in each category. In fashion, comics and music, the $1M concentrations were much lower, between 5% and 7%, although the number of $1M projects in those categories was much lower, between 0.01% - 0.03% of the total.

So what's behind the big-money concentrations, and why is it greater in some categories than others?

One theory would be the entrance of established players into certain segments, creating a scaling up or 'professionalization' effect. That seems plausible in the video games space, whose big players seem to have taken to crowdfunding faster than most other industries. A good point of comparison is music, which, despite being the earliest adopter of crowdfunding thanks to MarillionArtistShare and SellABand, has attracted very little participation from major labels. For most musicians, crowdfunding remains a funding source of last resort.

Another argument is that in some segments, larger sums are necessary to realize great projects. There's some merit in that idea, too. It's possible to record a professional-sounding album with much less expenditure on equipment and fewer labor hours than it takes to create a cutting-edge video game. The same could be said of a great comic versus a manufactured piece of technology. That's a useful reality check: the technical barriers to entry are still high in many industries, and some projects demand much greater resources than others. In plenty of cases, simply being a committed group of amateurs armed with a crowdfunding campaign isn't enough to succeed.

As I wrote recently in reference to Gittip, a big challenge for crowdfunding platforms - especially new ones - is to figure out how to spread success across lots of campaigns rather than having a few big hits that dominate. The platforms spend a lot of time on behind-the-scenes coaching and through initiatives like Kickstarter School. But is there a space for the community to support its own more effectively? I was at a talk by Elana Berkowitz of Etsy last week, and, with this question in mind, I asked her how the platform tries to diversify success away from a small number of sellers. She pointed to Etsy's Teams scheme, which encourages sellers to get together and collaborate. Teams are informal groups that can use the site to exchange information and tips, and Etsy is giving further encouragement to the movement by hostingMentor Month in some locations. At last count there were 8,565 teams on the site, ranging from vintage vendors in Chicago to tribal women leaders in the Amazon. It's an interesting model, and one it would be interesting to see crowdfunding platforms try out. The short timeframe of most campaigns certainly works against the idea of collaboration, but in the world of concentrated desserts we have currently, many would benefit from wider knowledge sharing.

Below are some of the numbers I've derived from Kickstarter projects to analyze funding profiles. I'm running similar analyses on civic crowdfunding platforms, too, where the question of wealth distribution may be a much deeper issue. More on that to follow.


Category Total projects Total raised No of $1M projects % of $1M+ projects Amount raised by $1M projects % raised by $1M projects
Overall 51,274 $738,000,000 51 0.10% $113,937,163 15.44%
Games 7,385 $166,090,000 27 0.37% $67,862,047 40.86%
Film & Video 30,722 $146,040,000 3 0.01% $10,226,536 7.00%
Design 5,698 $103,790,000 7 0.12% $17,842,203 17.19%
Music 25,614 $84,950,000 1 0.00% $1,192,793 1.40%
Technology 3,136 $78,170,000 10 0.32% $13,000,268 16.63%
Comics 3,294 $20,420,000 1 0.03% $1,254,120 6.14%
Fashion 4,504 $19,290,000 1 0.02% $1,053,830 5.46%
Photography 3,746 $9,710,000 1 0.03% $1,505,366 15.50%

(cross-posted at rodrigodavies.com)