 So thank you for having me here. I have a tendency to speak very quickly, and everyone has spoken English so perfectly that I forget myself so I would try and stay nice and slow, but if there's questions or anything feel free to interrupt or if you can talk about it later. So we have a mixed audience here. So I've been watching all these amazing crowdfunding presentations all day long, and as I did that I was updating the slides to not be embarrassed to put a ball of you and to incorporate some of those elements. So I'll try and talk to the popular audience and the academic audience this year. So I want to try and cover why I think crowdfunding is still worth studying, even though I've heard results keep doing this, provides evidence about why I think it's important and what we can learn from it. And I want to do that by asking four linked questions, and some of this has researched and some of you have seen already, some might be new research for you, but I want to talk about first why studying crowdfunding is a good idea and why those of us in the room should care about this and feel good that we do care about this. And then I want to ask about a question that's really bothering me, which is whether or not we can democratize access, increase access to entrepreneurial opportunities and whether crowdfunding and crowdinvesting can help us do that. And the related question is how smart the crowd is, and should we trust the crowd to be doing these things. And then I want to end up with, I hope kicking off some discussion that will fill up in the panel and also in our later dinner and everything else academically about where to go from here so that we have a thriving field that supports each other in these kind of research efforts. So, and I'm going to use a lot of my papers. Well, those are not the only papers in the subject. Many of you have written better papers on some of these topics, so I just feel that I haven't been able to swap everything in, but I was talking mostly about my research. But that doesn't mean that there's not a lot of other important work being done. Okay, so first, why study crowdfunding? So, there are four kinds of crowdfunding, and I wrote halfway through today, but you know this, because I think everybody in the room knows crowdfunding well enough to have a sense that there's multiple flavors. For the newcomers here, academics, because we're academics, will argue over which of these is crowdfunding or crowdinvesting and which ones aren't. It's not a very interesting fight. So, I'll just say for my purposes that there is equity crowdfunding, peer-to-peer lending, which is the more dubious of the set. Reward-based crowdfunding and charity-based crowdfunding, and those are the main examples of which most of the attention has gone to equity and reward-based crowdfunding. So, equity crowdfunding, as you've heard today, legal in the main parts of Europe. It was legal as of May 2016 in the U.S. It's off to a slow start in the United States for reasons that we can discuss, but a lot of that has to do with some of the regulatory issues. But also the fact that in the U.S. at least there's many sources of early seed funding, and crowdfunding does not get legitimated as a major way of raising money in this sort of field. So, they're off to a slow start, and we'll kind of come back to that issue. I have done a little bit of research with some of my partners on this, like Valicia Rahl and Berkeley and others. And the early results we have, at least in the U.S., equity crowdfunding dynamics look very similar to reward crowdfunding dynamics. So, there's a lot of important caveat that you've introduced in the European context, that we don't have access to the same data in the U.S. yet. So, I'm not considering it to be universal, but it's just in terms of what gets people to invest, we're seeing fairly similar types of patterns, but our data is still much truer than the kind of data that you guys are collecting here. So, I'm hoping to learn more about the European context, and I've learned a lot today that helps inform that further. So, I mostly study reward-based crowdfunding, and especially on Kickstarter. So, Kickstarter is already 0.2 billion dollars, and that's where most of the research has been. So, what I'm going to try and talk about most of the time today is sort of universal principles we can pull out of crowdfunding. But I wanted to justify, for everyone who studies Kickstarter in de Gaulle, the value of using those as proxies for studying things like innovation and entrepreneurship. So, crowdfunding is a pretty substantial source of innovation, and so there's a lot of canonical examples of those of us in the room have discussed already, like the Pebble Watch, Oculus Rift, and 3D Printer. But just to give you a sense of this, I've done a survey recently of over 60,000 successful Kickstarter projects, and 200,000 people backed up with the help of Kickstarter. And what I wanted to show you just to justify that there is real innovation happening, so when you study crowdfunding, you're studying something of real economic and innovative value. The chart at the bottom is the percentage of projects in each category that either self-reported that they won major awards, that's red, or that they have filed for patent, which is orange. So, the patent rate in the product and in melody space is over 25%, which suggests that people not only think there's real innovation, but are willing to engage in standard IP practices in order to protect those as well. So, there is real innovative activity, and we don't have to just say it anecdotally, we can actually point to the evidence and say, these are categories that really interesting things are happening. And I want to talk about why they're innovative in just a second, and what are the sources of innovation in crowdfunding are, but I think it's worth kind of noting that. A second reason to note the importance of, again, this is US Kickstarter data, or rather international Kickstarter data, most of which is in the US. But crowdfunding actually leads to start-up activity. So, this is again a reward-based crowdfunding. I found that in the sample of the 60,000 projects that raised the money on Kickstarter resulted in 5,000 new ongoing companies, and 11,000 companies that continued to get additional funding that were pre-existing. So, that's a fairly large source of economic activity and new venture activity. This shows you in this chart the number of, whether people set up organizations or products by product category. The line divides product-oriented categories, things like technology, food, product design, video games, from more art-oriented categories like publishing and theater. And what you can see is the gray line shows you that there's no formal project in the art-based, no formal company. So in the art-based categories, you didn't see a lot of companies, there's mostly individuals doing things in formal groups. But when you look at the activity in the product-oriented categories, you'll see that there is a large number of new organizations, the darker blue color, being work. So, there is really good reason for those of us who are interested in economic activity and innovation to study this field. We don't need to justify it as crowdfunding is an analogy. Something else, on its face, reward crowdfunding seems to lead to valuable economic activity. In fact, for every dollar that goes into a crowdfunding campaign in the US, you get a fairly large multiple. So in the survey, I asked people about the revenues they made over the last couple of years outside crowdfunding. So for every dollar they raised the crowdfunding, how much money did they make outside? So I did the math there. And on average, it's about $2.60 in revenue generated for every dollar raised in crowdfunding. And you can see by category, food actually is the product category that has the highest activity. And you can see also technology and does quite well for itself. So the only category that goes in the negative is fill. So I think you can see don't try to fill, I guess, is the lesson. But the point here is that there is real genuine outcomes from this. That the dollars that go into crowdfunding act as a multiplier for the wider economy. We're talking about money, but it should be clear that money is just a piece of why crowdfunding is valuable. In a separate survey, I asked people who received crowdfunding what were the value of their results were of the crowdfunding campaign was. And what I found was that it turned out that I need the money for the larger campaigns was actually ranked as a third or fourth biggest reason why people were bothering to go crowdfunding. Instead they were doing it to learn about customers, to build communities out of customers, and to get press and outside attention. So crowdfunding is part of a strategy and not the only reason why people are going through these efforts today. So that's my justification for why crowdfunding is valuable on its face. But it also gives insight to a lot of really interesting areas that we otherwise don't have as much of a chance to discover. So what I think is most important about crowdfunding is what it does that's sort of different in the world. So you can imagine that we've had a situation for a long time where we've known that we have communities that are innovative and doing interesting innovative work and discussing things online. I think like Twitter, your Facebook community, your online forums that you're on. But for a long time those communities might have been innovative, hobbyist forums, but they had trouble making change happen in the world. So crowdfunding is a way that online communities can actually affect change in the world. So I'm going to be able to quiz here along these lines. And I'm going to describe four films that were all in Kickstarter before 2013. And I want you to tell me which of these do you think got the most funding? So we're going to start on the upper left. This is BronyCon. So this is a phenomenon. There is a children's television program in the United States called My Little Pony. It's Indian small girls. It has magical ponies and powers. And it has been adopted widely by older adults, especially men who like the message of magic and empowerment. They dress up as ponies and go to operatives. They call themselves bronies. So this is a documentary about them. Upward Quarter is a sort of beautifully illustrated film. There's a fancy about a girl who suffers from spontaneous combustion and verses of flames. It's sort of an existentialist kind of drama. This is a movie about somebody who's really obsessed with the comedian Adam Sandler and makes a documentary about it. And the bottom right is a movie about a smoking computer hacker who reads information for the world. Which of these do you think raised the most money? The first one. So the first one. So what would we need to know if the first one raised the money? What kind of treatment? Who would be the one creating the project in order for it to raise the most money? What do you think? Insider or outsider? This was created by somebody who was actually sympathetic to the bronies. This is a group that's widely mocked. And here somebody was willing to tell their story in a nice way. And indeed it raised over $300,000 with the most funded Kickstarter project in movies until 2013 when films started to go on Kickstarter in a very large way. And this only makes sense if you understand that this is not just about a product being placed out there. This is about communities of organizers themselves. So we think about the Oculus Rift, the virtual reality helmet. It was bought by Facebook for $2 billion. And Palmer Wonky who created this. What happened was Oculus, the virtual reality was very popular in the late 1990s. A lot of money went into it. And it turned out it didn't work very well. I don't know if any of you had a chance to play any of the virtual reality games back then. But there were these large heavy headsets that cost $10,000. It was a very crude graphics. You fight a pterodactyl or whatever it was. It was a very crude game. And it never lived through its problems. So venture capitalists moved away from it. And no one would touch this space. So what happened was there was always an enthusiast group. Palmer was one of these enthusiasts. And when he was ready to run his Kickstarter campaign, he posted to his community forum saying, Hey, I'm going to launch this thing. Can anyone help me with a logo? Can anyone help me with interesting design? And that was the original community that started funding the project. So this is not just about sort of outside pits. This is about internal communities that people with replication were able to raise from them. So that could be anything from sort of this myelotony, brony thing, which you can watch the movie now, apparently, to 3D print it, which is another area where there's a lot of enthusiasts producing material. And if you had to go and get that to a conventional manufacturer, it would be a very expensive and difficult process. So given that communities are important, it raises a question of does crowdfunding democratize the way we innovate and develop entrepreneurship? So don't worry, you can't read this very clearly. You don't have to. But traditionally, when you were trying to get investment for a venture idea of some sort, there were intermediaries who would stand in the way. There were venture capitalists, private equity firms, investor banks, angel networks, and those were the people who were making decisions about who got what. Crowdfunding, you can go directly from the crowd to the people who might be potential investors. And that's important because at least in the U.S., this is the guy who gets all the money. Not directly, but he looks like the person who gets all the money. This is a white male scamper graph from a good school. And if you're a white male scamper graph in the U.S., you get a disproportionate share of the venture capital. And there's a lot of reasons why you get a disproportionate share of the venture capital. There's geographic issues. It's easier for BC to be connected to these people. But the problem with existing intermediaries is they have all of these sets of biases. Just to give you an example. So what's interesting is how does crowdfunding work to democratize who gains access to these sorts of resources? And there's a number of forces of democracy that are already in play that crowdfunding helps out with. So one of those is the fact that so many of you also know the user innovation space. So I think there's sort of a connection here, which is we know that innovation is already fairly democratized. It's not happening most in research life. It's happening everywhere from everybody. So in some of everybody's work, he shows that 20% of surgeons in Germany have modified or developed their own surgical equipment. 36% of plumbers have developed their own hardware for hanging types. 26% of librarians have developed their own software for managing libraries. People are innovating anytime they have a problem, right? They're just obviously innovating in large companies. So there was a nice study by Rod Hippel and Flowers and Company looking at a representative survey of the UK and finding out that 6.1% of all UK consumers, that's almost 3 million people, had developed an innovation that had been adopted by at least one of the person outside their family and friend ever. So if you totaled the amount, not even the amount of material, not even the amount of time, but the amount of materials cost going into this, that meant there was 1.4 times more expenditures going into R&D for consumer products from consumers than for all UK consumer R&D combined. So there was a huge amount of innovation that's already happening. The problem has always been getting to market and connecting to people. So just to give you a sense of how much the process of launching products then have dropped, and I realize that this is a very disturbing to see feet so large in a video, and I apologize. This big screen. But the cost of launching a web-based startup has dropped by 3 orders of magnitude since late 1990s. So you used to need $2 billion to launch a company, and now you can do it at $200 in a couple hours. So it's not just the innovations everywhere, the cost of launching innovation has been dropping at the same time. And it's not just software. So recent analysis of startups in the hardware space have found that you can launch a hardware project and complete end-to-end manufacturing and get these products to keep you from China for less than $50,000 an overhead. I mean, these are really dramatic changes. So everyone was already innovated. Now they have the tools and the ability to be able to reproduce those innovations at a much lower cost than before. So the amount of capital you need to launch something has dropped dramatically. So what's happened as a result has been radical changes in the way innovation and entrepreneurial innovation is funded. And I think it's happened in the U.S. and it's been happening at a lag rate elsewhere. So it used to be venture capitalists and angel investors were dealing with people to give you money because you needed $3 billion to launch websites, no one better your friends at $3 billion. You'd have to go to a venture capitalist firm in hope that they would give you that money. So very few people, most of those staffer grants, were the ones who were receiving that kind of cash. Then as the cost of startups started to drop, you had the rise of angel investors who were very influential and could give money and had enough money to talk to make that happen. Around 2005, because it became so cheap to fund startups, the next major innovation happened with incubators. So incubators like Wycombinator and Techstars were able to launch projects that gave people $20,000, $30,000 in funds and to venture and generate entirely new startups as a result. And as the cost has dropped even further, we're seeing even more, the crowdfunding can now fill that gap. So I no longer need official investors because they don't need a million dollars. I don't need even $100,000 to launch a project. I can do it for $70,000, $50,000. I can do it with the amount of money I can raise on the bar. So this is a really fundamental shift and I don't see any of this going away, right? Even if crowdfunding evolves, even if we change to some other method, the increasing cost of innovation is going to be critical in entrepreneurship. So first of all, not everything is good, right? So there's a barriers to democratization. Cost might be dropping, everything might be innovating, but there's still some things standing in our way. So this is a U.S. map, but money and networks are not democratized. So the mean distance between venture capitalists and a firm they invest in is 80 miles in the U.S. 80 miles, right? So this shows you the concentration of seed deal investments through 2014 in the U.S. And you could see if you're further back, everything's washed out, but maybe one or two splotches, right? And you know what those colors are, right? It's going to be sell at my valley, maybe New York, maybe Boston. But if you're an advance about to the United States and you draw someone back from Europe, there's no access to venture capital. You're not part of the network, you're not part of the connection. Is descriptive discrimination. So in the U.S., 40% of business owners are women, right? So 40% of all U.S. businesses are owned by women. So can you guess based on how much, how many of the 1% of VC-backed companies have a female co-founder in the U.S.? Give me a number. Five is optimistic, right? So it's just one co-founder is involved. Because all of our studies on female entrepreneurship and bias suggest that women generally perform as well as men and under some conditions perform better. And the discriminatory conditions perform a little bit worse, but not that much worse. So there's something going on here that's creating these sets of barriers, right? So this is where kind of crowdfunding becomes interesting. Because we can ask, does crowdfunding eliminate some of these geographic concerns and some of these discriminatory concerns? Because everyone's innovating, it's cheap. We should be making sure that it's not just in the U.S. the 10,000 well-connected people who are getting money because ideas should be everywhere. So on the geographic side, there's some evidence of geographic democratization. So there's been a lot more careful papers than the ones that I'm putting together here. So this is some basic evidence that shows you that the number of investments are scattered everywhere, but there's been a lot of further studies that showed. So I looked at geographic GD coefficients, but there are other measures, and by almost every measure, crowdfunding is better spread out than we see. This, by the way, shows you backers in the United States, which are sort of everywhere, right? So there are a lot of effects still, but you get huge geographic democratization. But you also, you know, might get gender democratization. So I want to talk about a research paper I had looking at this subject that's coming out of ASQ, trying to figure out when and if gender, the gender discrimination issue starts to go away. So it's based on the oldest social theory I think we have, which is homophily. So Aristotle wrote about homophily that like attracts like. So birds with a feather flock together, you like people who resemble yourself, right? And so this could be actually kind of a pernicious policy for people to have, because what happens is you have networks of people, right? And I tend to associate with people who look like me. So if you have a venture capital network, and it's mostly white men, they will tend to associate with other white men, right? And we see the same thing with ethnic groups of national origin, and you like those people better. And therefore those people have exclusive privilege to your network. But let's say that you're an enlightened individual and you realize that you're being discriminatory in this way. So you're not going to be obviously discriminatory. You're going to try to figure out a way to let anyone into your project. The problem is something called induced homophily. So even though I may want to see female entrepreneurs as a white male venture capitalist, as my network starts to include more white men and they include other white men from Stanford and so on, it creates a situation where the network locks out people who are different. Even if individuals want to act differently, because my network, which is where I get my information about how to make investments and who to invest in, becomes exclusively white male or predominantly white male. It becomes very digital for other individuals to use this network. So we call this induced homophily. The individual legging is choice homophily. It's that I choose to associate with someone like that. Induced homophily is the overall network effect. So the traditional solution to this has been let's promote more women as venture capitalists and then they'll create their own exclusive induced network with women. And we can even things out by basically solving the problem. So we want to look at whether or not this was solving the issue. So we turn to our Kickstarter data. And we found something interesting. So we looked at the, this is the success rate of founders in different industry areas. So fashion, children's book publishing, film, technology, and video games. We picked these because they have different amounts of women backing projects. Right? So fashion has a majority women as those children's book publishing as backers, as investors. And then film, technology, and games have a more, films are even basically and the others are minorities. So we expected that this argument about homophily was true. That basically what crowdfunding would do would be letting more women be able to participate. You'd expect that women would be outperforming men at a high rate in these categories in fashion and publishing because that's where women were predominant in the fact. Right? And by the way, there's a huge effect. So women are about 60% more likely to succeed than men in crowdfunding. All of these things being equal. And that's the only area of investment that women outperform men that we found. So we see there's no bias, bank loans, there's no bias, angel investment, there's no bias, but the bias is pro-women in crowdfunding. So we tried to figure out why. We thought, okay, if the reason is because women support each other, we would find all of the support happening here. But statistically, almost all the impact is a dissent. Women outperform men by a huge amount in areas where their elites represent, not most represented. Right? So the bias actually is not what we were expecting to be. Statistically. I know you can see some effect here, right? But it actually washes out. So women are outperforming when there are almost no women as bankers. So we were trying to figure out why this was the case. So we actually did that experiment after doing some theorizing. So what was the theorizing? Our theorizing was that homophily is not just a dyadic thing. With the dyadic traditional view of homophily, Lars and I look alike, so we're more likely to associate with each other, right? Then somebody who is different and has a different kind of background. We theorized and said there might be something called activist choice homophily. Where I wasn't just considering my dyadic relationship, but I was also thinking about the group that we share as a dyad. Right? So if dashing business school professors are being discriminated against, the fact that that's happening, you and I would recognize that as fellow group members and that would influence my desire to help you out, right? So I'm helping people to help overcome a perceived shared disadvantage about it. So for a minority group, the fact that you felt that you were a member of a minority that was being discriminated against would make you more inclined to help other people from the minority group in situations where they were being discriminated against. So we actually mentioned this, and we conducted a lot of experiment. What we did was take this project here, which was makey makey. It would make anything to elect for our keyboard. It was for a while the most funded project in terms of a number of investors in the technology space on Kickstarter. And we showed this project in a lot of experiment with one change. So we took out the real inventor and we included either Jessica Smith or Michael Smith here. Most common name for millennials. These are both people from a Dutch project that took representative photos of individuals dressed the same way, same basic hair cut, same basic smile. And they are judged by a project of Princeton that these people are equally attractive. So you could calibrate your own sense of who you find hot by looking at these pictures and deciding which way you go. Because statistically, these are exactly the same attractors. So we didn't change anything else about these products that people were viewing, except that some of them saw this as created by a woman and some of them saw this as created by a bear. And then we also measured homophily, right? So we measured what we actually did was gave people bonus money and asked them if they wanted to invest some of that money in a project. We asked them quality of a project when they were looking at it. And we also measured whether or not they felt connection to the creator, whether that connection was an individual or an activist choice. We thought it was kind of interesting. In fact, for men, there was no bias one way or another. They didn't seem to be more inclined for men. There were some individual homophily towards men, obviously. But none of that had an effect on willingness to back projects. The difference was for women. This was kind of interesting. So the women who who responded to activist choice things who felt that women were or that it was important to help other women who were being discriminated against who felt that technology was a place where women were discriminated against and saw connection to the woman being funded were more likely to both give funds and think that the quality of the project was higher when they saw a project created by women. That was about a third of all women. The other two thirds of women, when they saw the project created by the men, they thought that was a higher quality. So completely totally up to there. Nothing changed with the project. Everyone saw one project. So this is a larger sample study. But it meant that the activist women thought the project created by the women were better and were willing to give money to support them. They saw the project created by the men and were not activists. They liked the project better, but they were less as they didn't have any place to give money. And this effect actually totally mediated all of the effects that we're seeing. If you look at the paper, we've got all our diagrams and so forth have been stopped and all that things. But basically almost all of the direct effect, 83% of the effect plus was moderated by this activist choice model. So what does this mean? They were previously disadvantaged against in crowdfunding, don't just get an advantage by getting access to other people, but they also get attacked into this activist space of people who want to support each other. So it's not just a pure investment decision people are making on crowdfunding. There is a strong emotional component based on a set of shared characteristics with the founder, which is something I think we need to divide when we do our research, that it's not purely sort of a rational and based on a script of characteristics some of which may operate in sort of interesting ways. So that's one set of findings. So what does this mean? I think that overall the answer to the first question crowdfunding can lead to democratization because it increases the number of people who participate and it seems to allow you to overcome a historical disadvantage by an activism. Okay. How smart is the crowd? Two sort of famous books written about a hundred years apart. One of them is called The Wisdom of Crowds by James Sherway, who just kicked off a whole interesting crowd decision-making and prediction markets. But if you go back a hundred years before that, there was a famous book called The Madness of Crowds that explained that when you get crowds together and they set fire to witches and buy tulips and do all sorts of crazy things. So the question is, when we have giant crowds making decisions to the experts, what happens? And we actually watched a really interesting paper on exactly this topic earlier today that showed some factors in this and I'll try to bring that up as we go. So I decided to do a study with Ramana Ganga of HBS and this is Publisher Man with the Science where we looked at the most subjective category we can think of at crowdfunding, which was theater. So here's a case where you're expected to be a very large, high-culture, low-culture divide. And this gave a big deal because as of 2012 in the United States, more money goes to the arts through Kickstarter than the national nominee arts, which is the official government agency that sponsors arts in the United States. So the crowd is now a bigger source of arts funding for new projects than the government in their support culture. And if you talk to theater people at this, they get very worried because they think this is just to be much, many more musicals by talking cats and many less high-concept theater projects. So we brought in experts who judge these sorts of theater brands into a value-aided project that has been explored on Kickstarter before. And we used the NEA official criteria about what makes a project good, about artistic merit, feasibility and response to an audience. And we also looked at Kickstarter projects. So we knew what happened to the project they gained. And we got to see sort of the outcomes. The first study was that crowd experts surprisingly agreed even this very subjective, non-investment field. So 60% of the time the crowd and experts agreed with each other. And more successful projects as the crowd liked tended to be one of the experts liked also. When there was disagreement between the crowd and the experts, it was almost always because the crowd was willing to fund something that the experts were not. So it actually lowered the bar while having the same quality direction lowered the bar for projects more projects would get funded under this regime than otherwise. We were able to look at older projects and older theater projects were able to see what happened to these things after they finally appeared in the theater. And what turned out to be interesting was how this ended up working. We were able to look at the projects that both experts and crowd funded and followed forward and I judged the project in success if the project was staged and ran for a lot of period. Right? It was considered a failure if it closed before I was supposed to. It was considered a commercial hit if it had a long-term extended run and an artistic hit if it won a major theater award. So the things the experts and crowd both liked almost all ended up being fine. There was one big commercial hit out of it but almost all of them were staged ran their piece and left. When you look at the projects the experts didn't like but the crowd was willing to fight. The picture was different. We had our first failure which was a great review in the New York Times of this project which said when I came to the theater and started watching the play I tried to think of anything good I could say about it and the thump on the programs was pretty nice. Right? So it closed after one or two performances that was it. So that was the failure but they also had two artistic hits that won major theater awards and two commercial hits that ended up having extended off Broadway runs. Right? And everything else was a success. It's not firm data, it's fault data but suggests that what the crowd selects for is sort of increased variance. That they're willing to let more things get a try. More innovative things happen. Increase the chance of failure also increase the chance of success. For those of you who have to see the paper today about the crowd opinion or the expert opinion on loans I think you see some of the same thing. There's increasing evidence that experts are more conservative and more likely to avoid failure but are less likely to potentially break through projects. So I think this is good news in terms of the evaluation of the experts. I've done a little bit of work in looking at other signals of quality and comparing the signals of quality that investors look for what the kind of signals of quality the crowd look for. And statistically I found that things like having endorsements at least paper articles and crowdfunding sites saying this is a great project that increase your chance of success. In the same way, professionals having a team of experience which professional investors look for will also increase your chance of success in crowdfunding. Show prototypes or detailed plans themselves. So a single spelling error in your description of your project decrease your chance of success by 13%. So there are crowds looking for real detailed kind of information. On the other hand, I look at things that the internet might still care about. So do you have a cat video? Do you talk about Star Wars? Do you mention that you're a nerd? Something like that. None of that would really predict success in any service way. So the crowds seem to be pretty rational in picking the kinds of projects that investors would have also picked. And I think it's more evidence for this in some of the failure research on Kickstarter. So the failure rate on Kickstarter is surprising to low. I have a study that shows about 9%. So it's hard to compare that to raw start-up data because of the way people are doing things but about 9% of products don't deliver. And what I think is really heartening about this and I know a lot of you are involved in projects looking into this stuff in more detail but as far as I can tell from my data I can't find a significant predictor based on easily available data on what the outcomes what causes failure on crowdfunding once you've been funded. Investors would have. I still have to go through that. But if you look at just the kind of information that's provided on a crowdfunding website about who the inventor is their background none of that predicts failure. So once failure has been raised funding it is not immediately obvious which projects are going to fail. So gender doesn't work education doesn't work team or individuals doesn't seem to work whether your children doesn't seem to work marital status doesn't seem to work. Which I think is heartening news at that point it means that you should feel free to invest in a married woman with children or somebody with high school education or whatever it is and the chance of success given funding doesn't seem to be varied. So I've seen this picture several times also. So the other issue is fraud so failure is one thing which means honest attempts to make something happen as far as we know the fraud rate is very low so it looks like there's a number of studies that less than about one percent of projects or two and a half percent of projects may I count are actually fraudulent. So there's a few big examples a lot of those terms but a lot of the terms bad later on but in terms of raising money initially most are not fraudulent. And the reason for this I think is interesting because it's rooted I think in the community piece. I know a lot of you are investigating this further it was a second fraud, a Kickstarter and it was Kobe beef jerky so beef jerky made of the finest meat it was a brilliant idea to raise money as a fraud because normally does everyone like high-end meat and beef jerky but which are untrended in this moment but also it was a great fraud because you couldn't tell they could actually go through the whole project raise money and then actually say you beef jerky I did say it's Kobe beef jerky there's no way you would know but it wasn't unless you were very concerned about it so it was a brilliant fraud and they put a lot of effort into this fraud so this group actually ended up hiring a bunch of people or faking a bunch of people creating accounts on Kickstarter of all these fake individuals who then chimed in once they launched their account saying they had tasted the beef jerky and it was amazing. So a very sophisticated fraud they had somebody who pretended to be a military veteran by the product that they were being unpatriotic there's a whole lot of very elaborate moves and what stopped it is something called Linus' Law so Linus' Law is from Linus Torbal the inventor of Linux and Linus' Law in the programming world states that with enough eyes all bugs are shallow what that means is if enough people look at a problem there's someone that problems with triviality it's why these conferences are so great is that I stand in front of other people if I made an error or one of you will note it and tell me later and I'll feel bad but the same sort of thing happens here which is that because I remember the community aspect as the project starts to be successful more and more people are drawn to look at that project from different communities so you wouldn't know that there is an online community of Kobe beef fanatics and there's an online community of beef jerky fanatics and as this project started to be successful both those groups started to look at this project they were difficult to answer there are only 2,000 pounds of Kobe beef important in the United States every year how are you going to get enough to do this kind of project what tag numbers are your beef because all the beef have particular numbers, serial numbers in Japan that are associated with that the jerky people start saying well actually if fatty meat makes very bad jerky and you can only use these very specific cuts because Kobe beef is very fatty how are you going to get around this problem and under the weight of this sort of evidence and it was actually flagged as a fraudulent project and Kickstarter started to shut it down after raising $100,000 so this was not stopped by the fraud team this was stopped by a group of people who are spotting this kind of error and you'll notice that in certain areas where the platform never steps in when fraud is indicated which Indiegogo has frequently happened in the past fraud is much more likely than a scenario where the individual user has been spot of fraud and flagged and shut down the project and this is very low for this set of reasons it doesn't mean it doesn't happen and there's a lot of fraud that a lot of fraud may have it after the fact the person who buys a house with the money they've raised because they're being foolish but in terms of a potential fraud very low, lower than you'd expect given this entirely unregulated market that can be built for this kind of fraudulent stuff the answer here is that the crowd is surprisingly wise it seems to use rational criteria to decide when to back projects so it gives more people opportunities if fraud is low but it has to be said that this is conditional on projects having enough eyeballs enough people looking at them projects having enough diversity of people looking at them and platforms needing to be willing to work on signals so if you have a small equity platform that doesn't act on signals of fraud and doesn't have a lot of people on the platform and it's a very non-diverse group of people you're going to have a much higher fraud problem than you would in Kickstarter so platform size is a strong indicator of fraud of the potential for fraud a few minutes left so I want to talk about the last question which is what I think we should be looking at next and so first I want to speak to the academics in the room because I think this is an important question which is what we want our research to be our community here and this is great I mean it's been amazing to have all these people see all these talks on simpler issues thank you guys for citing me by the way that helps my tenure decision so I appreciate it but I think there's a question that was first asked at the Berkeley conference in 2011 and I think it's important now so the the worst case scenario for us in some way is that crowdfunding is where we only study crowdfunding as a phenomenon itself so we do papers about crowdfunding that are only about things that are interesting if you care about crowdfunding and I care about crowdfunding, I think it's important but I think we have to be careful that it's not the only thing we do when Toby Stewart was talking about this in the new field he was pointing us to the danger of the entrepreneurship literature which although it's broken out recently for many years was really a specialized set of literature and specialized journals because entrepreneurship scholars insisted that entrepreneurship was a very different thing than other kinds of organizational research or strategy research or finance research and so it became a very isolated group so I think we need to we can talk about crowdfunding in all my papers I think say something useful about crowdfunding itself but I think just being in a community that talks about crowdfunding to each other I think it's a dangerous kind of outcome that puts us out of the journals that we all want to publish in or the B journals we want to publish in so I want to do a couple other options another option is that you can use crowdfunding as a non-left-center view of entrepreneurship and innovation I think this has been very productive for some people so if crowdfunding is essentially innovation of an entrepreneurial activity and I hope the evidence I provide will help you guys make that argument when you want to do that but what's always tough about measuring innovation entrepreneurship is we end up only seeing successful cases so we end up in a left-sensory problem and we lose a lot of data that we need to do to understand success factors so crowdfunding whether you do it internally or we saw a great paper earlier about crowdfunding in a company context gives you a chance to fail the attempts as well as successful attempts so if we as a group continue to insist that this is something crowdfunding is a way of measuring entrepreneurial and innovative activity then papers with that as the analogy right we can write papers that are talking about these fundamental issues that matter to a lot of people at top terms so that's one option is we can talk about crowdfunding as a study of innovation entrepreneurship another way is similarly about the advancement level it's talking about crowdfunding as a new way to organize right so crowdfunding has interesting elements of user communities of online community discussion of self-organizing systems of markets as opposed to hierarchies and I think we can use this as an example again the main focus of paper would not be discussing crowdfunding and we're talking about these issues from a data set that we all have information about and we have a lot of data in it there for the future of our research and then I guess the in some ways the least interesting but most popular outcome would be crowdfunding just becomes a general proxy for finance innovation so it becomes the next path database so basically any time it becomes a generally accepted way of measuring entrepreneurship or innovation is measured crowdfunding and that's great for a citation counter perspective but in some ways it loses a little of the magic of crowdfunding by doing that proxy so I would like to suggest at least that we should see more and more papers that meet those middle two categories that either use crowdfunding as a way of looking at entrepreneurship innovations and activities or use crowdfunding to try and push our view of organizations that finance and strategy into the 21st century where traditional large organizations are not the only form of company and increasingly we see new forms of organizing that are more social than hierarchical and I think there's a lot of exciting research to be done but I think it's important that we don't put ourselves into a narrow box where we're crowdfunding people talking about crowdfunding people so I think it's so important we need to have these discussions so I want to sort of ask the general question that we keep talking about over drinks and dinner which is how do we avoid how do we work together as a community what do we do to keep this conference that you've organized that's amazing alive and keep these discussions alive I don't even know about many of these papers they've completely informed a lot of the users things I'm working on and I know it's probably happening vice versa so I want to think about how to do that and also there's a final draw problem so I've seen a lot of papers that I know people have already done work on and shelved because they either did find interesting results or they had paper problems that they've repolished and that's the problem with all social science all science but especially with crowdfunding because I think a lot of us are going for the same low-hanging fruit not realizing that it's low-hanging that it's been tried and picked before and it's not low-hanging fruit anymore so I'd like to encourage more ways of us thinking about how do we share the partial papers or tables of abandoned projects so that we can learn from stuff that isn't working and you know I spent a year and I think people figured out a better way to solve it working on paper that transform something else utterly where we're trying to show the effects of crowdfunding by looking at serial powering events and we just weren't able to find anything interesting now it doesn't mean there isn't something interesting there but it would be helpful if I could share with you why we failed with this so that you're going to have to spend the same month doing the same regressions that we did with Kickstarter data and Neil and I found a very interesting gender issue and that's what we're working on for paper but I want to think about these issues so one thing I was thinking about suggesting is I went over to MIT and it's a big push for research on user innovation and open source and Prudh Lakhani and Eric Bond people set up an open directory that anyone can register for be approved if you're an academic where you can upload a paper in an abstract and it can be on any kind of even pre-SSR style working papers or just ideas for papers so that you at least have directory people working at similar things to find people at papers that you might be interested in working in or calls for effort is that something that would be interesting for you guys if I send an email to this list just as a push I have to be interested in doing that so I'm going to put some effort in trying to do that and get some funding to do it I'm happy to coordinate with you guys as well but I think having some sort of crowdfunding.research.something would be a really useful tool so we could start throwing up that set of stuff and find a collaborative opportunity because I think we don't move forward we just keep kicking over to the same bones over and over again this is quite an academic message the other thing I would say is what's missing from a lot of crowdfunding work and from a lot of policy discussions with crowdfunding is their value of community so crowdfunding isn't just about funding it's also about the crowd so thinking about why community matters is important when I surveyed failures the issue about community you know first and second and failures and why people attribute failure to crowdfunding so an average project in the film gallery if you have 10 Facebook friends you have 9% chance of succeeding if you have 1000 friends you have 40% chance of succeeding now I'm not saying it's causal but I think we need to keep in mind that this crowd stuff matters also in crowdfunding and so what does it all mean? I think we're at a space that continues to evolve but it really is interesting to think about crowdfunding as a way that communities make things happen most of the news about crowdfunding is good it gives people more opportunities it will lead to more businesses more small companies and more innovations but the flip side is that government policy makers need to figure out the role there's not a lot of systematic problems yet but we're also not seeing equity but it will take off in the way that you expect to given how our work is going so it's worth thinking about so that's it for me, thank you feel free to contact me I put up a lot of papers on the start of innovation I will figure out a new site I will email everybody out and try to build a community around this I think people will keep laughing I can help in any way please let me do it I'm still doing my faculty but I'll be as useful as I can be and I'm sure other people feel the same way so hopefully bond together over sausages later and talk more about this thank you guys very much, I appreciate it