A machine learning approach to predict the success of crowdfunding fintech project

Abstract

PurposeThe crowdfunding market has experienced rapid growth in recent years. However, not all projects are successfully financed because of information asymmetries between the founder and the providers of external finance. This shortfall in funding has made factors that lead to successful fundraising, a great interest to researchers. This study draws on the social capital theory, human capital theory and level of processing (LOP) theory to predict the success of crowdfunding projects.Design/methodology/approachA feature set is extracted and correlations between project success and features are utilized to order the features. The artificial neural network (ANN) is popularly applied to analyze the dependencies of the input variables to improve the accuracy of prediction. However, the problem of overfitting may exist in such neural networks. This study proposes a neural network method based on ensemble machine learning and dropout methods to generate several neural networks for preventing the problem of overfitting. Four machine learning techniques are applied and compared for prediction performance.FindingsThis study shows that the success of crowdfunding projects can be predicted by measuring and analyzing big data of social media activity, human capital of funders and online project presentation. The ensemble neural network method achieves highest accuracy. The investments rose from early projects and another platform by the funder serve as credible indicators for later investors.Practical implicationsThe managerial implication of this study is that the project founders and investors can apply the proposed model to predict the success of crowdfunding projects. This study also identifies the most influential features that affect fundraising outcomes. The project funders can use these features to increase the successful opportunities of crowdfunding project.Originality/valueThis study contributes to apply a new machine learning modeling method to extract features from activity data of crowdfunding platforms and predict crowdfunding project success. In addition, it contributes to the research on the deployment of social capital, human capital and online presentation strategies in a crowdfunding context as well as offers practical implications for project funders and investors.