Predicting Startup Crowdfunding Success through Longitudinal Social Engagement Analysis

Abstract

A key ingredient to a startup's success is its ability to raise funding at an early stage. Crowdfunding has emerged as an exciting new mechanism for connecting startups with potentially thousands of investors. Nonetheless, little is known about its effectiveness, nor the strategies that entrepreneurs should adopt in order to maximize their rate of success. In this paper, we perform a longitudinal data collection and analysis of AngelList - a popular crowdfunding social platform for connecting investors and entrepreneurs. Over a 7-10 month period, we track companies that are actively fund-raising on AngelList, and record their level of social engagement on AngelList, Twitter, and Facebook. Through a series of measures on social en- gagement (e.g. number of tweets, posts, new followers), our analysis shows that active engagement on social media is highly correlated to crowdfunding success. In some cases, the engagement level is an order of magnitude higher for successful companies. We further apply a range of machine learning techniques (e.g. decision tree, SVM, KNN, etc) to predict the ability of a company to success- fully raise funding based on its social engagement and other metrics. Since fund-raising is a rare event, we explore various techniques to deal with class imbalance issues. We observe that some metrics (e.g. AngelList followers and Facebook posts) are more signi cant than other metrics in predicting fund-raising success. Furthermore, despite the class imbalance, we are able to predict crowdfunding success with 84% accuracy.