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.

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