Better to Give Than to Receive: Impact of Adding a Donation Scheme to Reward-Based Crowdfunding Campaigns

Abstract

The choice funding scheme is an important design dimension in crowdfunding for which platforms should not assume that they are restricted to the use of one funding scheme. In particular, we find that the addition of a donation scheme can increase the success rate of reward campaigns substantially, especially those with prosocial causes. In addition, the donation received is found to have a crowd-in effect on subsequent contributions. To get the most out of donation schemes, crowdfunding sites should provide features that help backers locate reward campaigns for prosocial causes, for example, by providing tags or search filters related to prosocial causes. Second, campaign owners should take steps to highlight the prosocial aspects of their crowdfunding campaign, for example, by revising campaign descriptions to include prosocial keywords/tags. Third, campaign owners should play a more active role in encouraging early donations to enjoy the crowd-in effect that could help their campaigns reach the targeted funding amount. Specifically, the owner’s direct social network is a potentially good source for soliciting these early donations. Relatedly, the campaign owners could benefit by spreading the word about the early donations they receive so as to generate a greater crowd-in effect at later phases of the crowdfunding process.