Launch on a High Note: How Prefunding Affects Crowdfunding Outcomes (original) (raw)

The Dynamics of Crowdfunding: An Exploratory Study

Journal of Business Venturing, 2013

Crowdfunding allows founders of for-profit, artistic, and cultural ventures to fund their efforts by drawing on relatively small contributions from a relatively large number of individuals using the internet, without standard financial intermediaries. Drawing on a dataset of over 48,500 projects with combined funding over $237 M, this paper offers a description of the underlying dynamics of success and failure among crowdfunded ventures. It suggests that personal networks and underlying project quality are associated with the success of crowdfunding efforts, and that geography is related to both the type of projects proposed and successful fundraising. Finally, I find that the vast majority of founders seem to fulfill their obligations to funders, but that over 75% deliver products later than expected, with the degree of delay predicted by the level and amount of funding a project receives. These results offer insight into the emerging phenomenon of crowdfunding, and also shed light more generally on the ways that the actions of founders may affect their ability to receive entrepreneurial financing.

Winning the crowd in online fundraising platforms: The roles of founder and project features

Electronic Commerce Research and Applications, 2017

Crowdfunding is regarded as a novel way of collecting money for innovators to introduce products or services they ultimately wish to launch. The question arises, however, of what makes funding projects on these online platforms, with their different features of project evaluation and risk management, more successful than traditional fundraising approaches. We examine this question in the context of a preordering model, which is also known as the reward-based crowdfunding model. A large-sample data analysis based on 116,956 crowdfunding projects on Kickstarter showed that most founder (i.e., identity disclosure and prior experience) and project (i.e., comments, updates, description elaborateness, and campaign duration) features have a positive effect on successful crowd fundraising. We also found a negative relationship between the funding goal amount and successful fundraising. Our findings may contribute not only to knowledge accumulation in crowdfunding research, but also to founders by offering evidence-based guidelines on the design of successful crowdfunding projects in an online fundraising platform.

Winning the crowd in online fundraising platforms: The roles of founder and project features q

ELSEVIER, 2017

Mind the Gap: Crowdfunding and the Role of Seed Money

Managerial and Decision Economics, 2015

Mind the Gap: Crowd-Funding and the Role of Seed Money 1 We analyze voluntary private contributions to public goods and the role seed money plays in signaling the public good's quality to potential subsequent contributors. We present a theoretical model and analyze two sets of naturally occurring data from crowd-funding platforms. After developing the theoretical background we find statistically significant switch points which distinguish between seed contributions to subsequent contributions. A positive change in contribution behavior after the switch suggests an increase in the perceived value of the public good. We find that the signal comprises the number of contributors and the average contribution (as proportion of targeted goal).

Evolutionary Fundraising Patterns and Entrepreneurial Performance in Crowdfunding Platforms

The emergence of crowdfunding could unleash substantial changes in the business environment. With the new funding platform, technology start-ups can easily access external resources. For fledgling entrepreneurs, both obtaining financial resources and creating innovation are important for their survival. Most research has been focusing on how entrepreneurs successfully raise money, but there is lack of attention to whether successfully funded crowdfunding projects deliver outcomes or not. We investigate the existing dynamics in fundraising process, and how the fundraising patterns are related to crowdfunding projects performance. We develop our research hypotheses based on entrepreneurship theory and bandwagon effects literature. Using functional data analysis method, we examine our research questions. The current findings show the various impacts of fundraising patterns on entrepreneurs' performance. This study will contribute to crowdfunding and entrepreneurship literature and offer practical implications by providing a theoretical framework and the supporting empirical evidence.

Crowdfunding: Tapping the Right Crowd

With crowdfunding, an entrepreneur raises external financing from a large audience (the "crowd"), in which each individual provides a very small amount, instead of soliciting a small group of sophisticated investors. This article compares two forms of crowdfunding: entrepreneurs solicit individuals either to pre-order the product or to advance a fixed amount of money in exchange for a share of future profits (or equity). In either case, we assume that "crowdfunders" enjoy "community benefits" that increase their utility. Using a unified model, we show that the entrepreneur prefers pre-ordering if the initial capital requirement is relatively small compared with market size and prefers profit sharing otherwise. Our conclusions have implications for managerial decisions in the early development stage of firms, when the entrepreneur needs to build a community of individuals with whom he or she must interact. We also offer extensions on the impact of quality uncertainty and information asymmetry.

Signalling Strategy and Success of Crowdfunding Campaign

International Journal of Business and Society

Improving the funding results of crowdfunding campaigns is a pivotal point for entrepreneurs, investors, and platforms. Building upon previous research in the field of crowdfunding and signaling theory, we propose a logistic regression to identify the determinants of the success of 5228 KissKissBankBank crowdfunding. The main focus is on estimating the role of signalling opportunities provided to project initiators and funders in mitigating the harmful consequences of asymmetric information. Our main results reveal that, as expected, the success of crowdfunding campaigns is promoted by the signal of identity, patience, pointing, reciprocity, intention and interactivity. The ambition signal is a factor that hinders funding success. Contrary to our research hypotheses, the signal of reputation and social capital has a negative impact on the probability of crowdfunding projects' success. The findings provide not only empirical evidence to understanding the importance of the role of...

CROWDFUNDING: ANTECEDENTS OF NUMBER OF BACKERS AND SUCCESS OF A PROJECT

International Journal of Small Business and Entrepreneurship Research, 2021

This paper offers a discussion of the projects of a crowdfunding platform and exposes the determinants of the success and failure dynamics of crowdfunding projects. We have shown with two different models' estimation that the probability of success comes through attracting a greater number of backers and demonstrated the antecedents of attracting sufficient number of backers. Drawing around 303,582 projects from an artistic crowdfunding platform this paper attempts to show that number of backers of a project depend on factors such as goal amount, time between project start and end date, amount pledged by backers, and the main category of the project. The project success ultimately comes through the accomplishment of being able to bring adequate number of backers. We have contributed to the crowdfunding projects' success-failure dynamics research by offering important insights with two different models and discussing options that can still be explored in this area.

The wisdom of the crowd in funding: information heterogeneity and social networks of crowdfunders

Small Business Economics, 2017

Crowdfunding has enabled large crowds to fund innovative projects. This type of funding might tap into the wisdom of crowds who were previously disconnected from the funding process. We distinguish between in-crowd and out-crowd funders (with and without ties to project creators) in order to test for heteroge-neity in their information use. Based on the analysis of a large-scale survey amongst project funders, this paper shows that in-crowd investors rely more on information about the project creator than out-crowd investors. Out-crowd investors do not seem to attach more importance to information about the project itself than in-crowd investors, except in the case of donation-based crowdfunding. For financial return crowdfunding, financial information becomes less important once a strong relationship with the project creator is established. Our study allows project creators to target information to specific audiences based on their relationship strength across different types of crowdfunding projects.

The wisdom of the crowd in funding: : Information heterogeneity and social networks of crowdfunder

RePEc: Research Papers in Economics, 2016

Crowdfunding has enabled large crowds to fund innovative projects. This type of funding might tap into the wisdom of crowds who were previously disconnected from the funding process. We distinguish between in-crowd and out-crowd funders (with and without ties to project creators) in order to test for heterogeneity in their information use. Based on the analysis of a large-scale survey amongst project funders, this paper shows that in-crowd investors rely more on information about the project creator than out-crowd investors. Outcrowd investors do not seem to attach more importance to information about the project itself than in-crowd investors, except in the case of donation-based crowdfunding. For financial return crowdfunding, financial information becomes less important once a strong relationship with the project creator is established. Our study allows project creators to target information to specific audiences based on their relationship strength across different types of crowdfunding projects.

Launch on a High Note: How Prefunding Affects Crowdfunding Outcomes (original) (raw)

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