Red flags and rave reviews: Explaining too-good-to-be-true crowdfunding campaigns

Crowdfunding platforms enable entrepreneurs to bring to life ideas that may otherwise have remained unrealized. When crowdfunding campaigns go well, campaigners are able to fulfill their vision, funders' engagement is rewarded, and society gains access to a range of new offerings. But some recent high-profile medical-technology campaigns have failed to deliver their promised rewards despite reaching and at times far exceeding their funding goals. The objectives of this article are to shed light on why donors fund campaigns that turn out to be too good to be true and to examine how this engagement reduces trust in crowdfunding. To this end, I explore the role of product creativity as a dual mechanism for both funding success and postfunding delivery failure. Product creativity is typically associated with positive crowdfunding outcomes. But in the context of medicaltechnology campaigns, product creativity may make community members more attracted to campaigns that are less likely to deliver on their campaign promises. This phenomenon then increases the likelihood that the campaign will reduce trust in crowdfunding, hurting donors, the focal venture, and future campaigners. I offer practical implications for crowdfunding platforms, campaigners, and supporters interested in learning more about the pitfalls associated with initially successful crowdfunding campaigns. (c) 2021 Kelley School of Business, Indiana University. Published by Elsevier Inc. All rights reserved.