Crowdfunding: Weigh the Win and the Loss Together
Crowdfunding investments can pay off big if a project succeeds, but they can also wipe out most of your principal if it fails. That's why judging a deal purely on its rosy best-case return is risky. To get a real sense of what to expect, you need to weight both the success and failure outcomes by their probabilities and combine them into a single expected value. If that expected value is negative, you'd lose money on average across many repeated bets, even if any single deal could still pay off.
This calculator takes your investment amount, success probability, return if successful, and recovery rate if it fails, then shows the payout in each scenario, the probability-weighted expected payout, expected net profit, and expected return rate. Try lowering the success probability slightly and watch how sensitive the expected return is. For equity-style deals with no collateral, it's safer to assume a low recovery rate if things go wrong.
Spreading smaller amounts across several projects instead of concentrating on one promising-looking deal can meaningfully cushion the impact if one or two fail, so consider diversification alongside the expected-value math.
Frequently Asked Questions
Success probability × payout if it wins, plus failure probability × recovery if it fails, equals expected payout. Subtract your investment for expected profit.
There's no fixed formula. Look at the issuer's business plan, financials, and similar past projects, and lean conservative.
Depends on the structure. Collateralized or senior debt may return some funds; equity deals with no collateral can lose everything. Compare recovery rates.
※ Success probability and recovery rate are assumptions. Results are estimates only.