We develop a model where reward-based crowdfunding enables firms to obtain a reliable proof of concept early in their production cycle: they learn about total demand from a limited sample of target consumers pre-ordering a new product. Learning from the crowdfunding sample creates a valuable...

While firms have obtained outside financing from large numbers of investors on financial markets for centuries, online crowdfunding platforms have only emerged as a major source of funding for start-ups and new projects for a decade. The information available to backers on crowdfunding platforms...