Co-Investment Network Dynamics in Crowdfunded Ventures

We examine the relationship between investment behavior of individual investors on crowdfunding platforms and the fundraising outcomes in crowdfunded ventures. Extant research has identified two main drivers for crowdfunding investments: irrational herding behavior of investors driven simply by observation of other investors' actions; and rational herding behavior where investors take into account venture characteristics along with observed actions of other investors in making their own decisions. Here, we focus on investment characteristics of a network of co-investors in a focal venture on its crowdfunding growth at three stages -- early, middle, and late. Using data on crowdfunding of music artists' ventures, we find that in addition to the factors identified in previous research, network characteristics such as the cliquishness of co-investors as well as the breadth of their co-investments in other artists play a significant role in determining the growth of investments in crowdfunded music ventures. We also show that this role is particularly important in the late phase, as compared to the early phase, of investment growth