Understanding the Role of Lead Donor Types in Civic Crowdfunding

Abstract

Civic crowdfunding is an emerging subgenre of crowdfunding wherein citizens contribute to financing civic projects that bring value to their community. Civic crowdfunding projects are oriented around community development, such as educational initiatives, transportation improvement and environmental enhancement programs. Civic crowdfunding thus deals with the financing of pure public goods. Given the public good nature of these projects, we consider the prior work in economics on private contributions to public goods, with a specific focus on the influence that prominent lead donors have on subsequent fundraising, and how that influence varies depending on the organization type (businesses, government entities and non-governmental organizations - NGOs), extending the lead donation literature by incorporating notions of source credibility (character, competence). Analyzing data from a leading civic crowdfunding platform in the United Kingdom, Spacehive, we first show that attracting lead donations from established organizations of any type is significantly associated with subsequent campaign fundraising success. We then demonstrate that lead donations are particularly beneficial when supplied by NGOs. Consistent with prior work in economics, we also find that lead donations operate by increasing average pledge amounts, rather than the number of individuals offering pledges, lending additional credibility to our findings, and suggesting that attracting lead donations may not be a particularly effective mechanism for building awareness. We discuss the implications for practice and for the literature on public goods and crowdfunding.