Learning to Raise Money: How and When Entrepreneurs Learn from Failed Crowdfunding Campaigns

The ability to learn from failure is of utmost importance to individuals, teams, and organizations. Yet, evidence suggests that organizational actors often ignore failures, struggle to understand their underlying causes, and ultimately fail to learn. Despite considerable scholarly attention devoted to this issue, our understanding of learning from failure and specifically the processes that may explain heterogeneity in learning outcomes remains incomplete. Based on the behavioral theory of the firm, we therefore examine the linkages between failure experiences, learning behaviors (i.e., explorative and exploitative learning), and learning outcomes. Using a comprehensive dataset of 62,532 crowdfunding projects, we map the learning trajectories of serial crowdfunders over time and show how their responses to project failure influence the success of their subsequent crowdfunding ventures. Our results demonstrate that failure and success trigger distinct learning processes – while failure is positively related to exploration, success increases the likelihood of exploitation. In turn, we find that exploration is negatively and exploitation positively related to future crowdfunding success. Moreover, we find some support for our assumption that temporal and social factors act as moderators influencing how entrepreneurs respond to performance feedback.