Reward-based Crowdfunding Platforms Research Articles

Incomplete Decisions on Reward-Based Crowdfunding Platforms: Exploring Motivations from Temporal and Social Perspectives

Incomplete Decisions on Reward-Based Crowdfunding Platforms: Exploring Motivations from Temporal and Social Perspectives

Ethical Consumers and Low-Income Sellers on China’s Reward-Based Crowdfunding Platforms: Are Poverty Alleviation Campaigns More Successful?

Ethical Consumers and Low-Income Sellers on China’s Reward-Based Crowdfunding Platforms: Are Poverty Alleviation Campaigns More Successful?

Effects of Scarcity-Induced Demand on Crowdfunding Market

Fundraisers on reward-based crowdfunding platforms have increasingly sought to base their promotional strategy on the principle of scarcity. Although previous studies find that using a limited-edition inventory contributes to the success of campaigns, it remains unknown how fundraisers should leverage a scarcity strategy in the upfront design of reward options. Using a unique dynamic panel dataset from a leading reward-based crowdfunding platform, we develop a hierarchical Bayesian model to capture the dynamic arrival process of backers at the reward option level. We find that backers are driven by excess demand rather than limited supply. Putting quantity restrictions on a reward option can discourage demand if it fails to accumulate an adequate number of backers first. In addition, the scarcity strategy is more effective in high-priced reward options than in low-priced reward options. This study offers practical implications for the implementation of a scarcity strategy for both platform managers and fundraisers.

Innovative transformation in finance: global and Turkish perspectives on crowdfunding

Purpose- The purpose of this article is to explore and analyze the transformative impact of crowdfunding, with a specific focus on the reward-based Fongogo crowdfunding platform in Turkey. The study aims to understand how crowdfunding disrupts traditional financing models, fosters collaboration and innovation, and contributes to financial inclusion for small businesses and startups. Additionally, the purpose involves comparing the project results of Fongogo with international examples to provide insights into Turkey's crowdfunding landscape. Methodology- The study employs a case study approach, focusing on the reward-based crowdfunding platform Fongogo. Data is collected and analyzed from the Fongogo platform in Turkey to gain insights into supporter dynamics, project success, and regional influences. Comparative analysis is conducted by comparing Fongogo's results with international crowdfunding examples. Additionally, literature on crowdfunding is reviewed to identify key success factors, such as project presentation, category, funding type, location, and team size Findings- The findings of the study reveal the diverse models and advantages of crowdfunding, emphasizing its transformative potential in the financial sector. Insights from Fongogo data shed light on supporter dynamics, the impact of project location, and the influence of technological literacy on crowdfunding success in Turkey. The comparative analysis with international examples provides a broader perspective on crowdfunding success factors, highlighting areas where Turkey's crowdfunding potential can be enhanced. Conclusion- In conclusion, the study advocates for the strategic positioning of crowdfunding as a vital financial tool in Turkey. The findings underscore the importance of user-friendly platforms, transparent operations, and effective communication by project owners. The impact of the new Crowdfunding Regulation in Turkey is discussed, acknowledging the need for further assessment as its implementation progresses. The study encourages leveraging the lessons learned from successful projects, both locally and internationally, to guide new initiatives and strengthen Turkey's crowdfunding ecosystem. Ultimately, the article aims to contribute insights to researchers, policymakers, and practitioners interested in the dynamic landscape of crowdfunding in Turkey and beyond. Keywords: Financial inclusion, reward-based crowdfunding, financial innovation, digital platforms JEL Codes: G23, L26, M13, O16, O35

Project certification and screening in the reward-based crowdfunding market

To alleviate the information asymmetry between fundraisers and backers, many crowdfunding platforms have launched quality certifications to help backers identify high-quality projects. Leveraging fine-grained data from Indiegogo, a well-known reward-based crowdfunding platform, we track the performance of crowdfunding projects before and after the fundraising periods and seek to understand the role of project certification in crowdfunding performance and project quality screening. Our key findings show that (1) certification has a positive effect on projects’ funding performance, both in the amount of pledged money (as a percentage of funding goal) and the probability of reaching the funding goals. (2) The certification authority could successfully screen out high-quality projects, which means that project certification is an efficient design in the two-sided crowdfunding market. Our study provides insights on project certification design in the online crowdfunding market and offers implications for fundraisers and platform managers.

Breaking down the crowd of backers: profiling cooperative strategies on a reward-based crowdfunding platform

ABSTRACT On crowdfunding platforms, the success of campaigns relies on the ability of projects to attract backers. While backers’ motivations have been examined, the dynamics existing among the distinct profiles of backers remain underexplored. Combining quantitative and qualitative methods, this research offers a typology of backers’ profiles and shows how these profiles contribute to the success of a crowdfunding campaign. Informed by the sociological theory of cooperation, these results explain how backers with different profiles influence each other’s decisions to support crowdfunding campaigns. We provide guidelines to project leaders and platforms to attract backers with the best profiles at the best moment to optimise the campaign’s success strategy. We also help crowdfunding platform managers build their crowd of backers and optimise their number of funded projects.

From hashtag to cashback: Success determinants in crowdfunders' user behavior

Crowdfunding is a popular approach for entrepreneurs to obtain financial support and has therefore gained importance in the literature and practice in recent years. The communication behavior of starters that lead to the success of a campaign will be summarized and expanded by new findings. As a theoretical added value, this article offers the first attempt to transfer communication theories to the field of reward-based crowdfunding to reveal success determinants in crowdfunders user behavior. The purpose of this paper is to give practical recommendations to starters on how to run a campaign successfully and, more generally, on how they can make full use of social media. By analyzing the dataset of crowdfunding campaigns from Startnext, the largest German-speaking reward-based crowdfunding platform, new success factors are identified using multivariate analysis methods. The results show that social media can offer significant value for businesspeople in terms of marketing if it is used strategically and frequently.

Strategic positioning of projects in crowdfunding platforms: do advanced technology terms referencing, signaling and articulation matter?

PurposeTracking trends in new technology funding patterns is essential for venture scaling. The emerging advanced digital technologies (ADT) such as virtual reality (VR), artificial intelligence (AI), blockchain and Internet-of-things (IoT) promote business innovation adaptations, and in turn, reshape the industrial landscape. To attract nascent funding for such prospective projects among the public, well-articulated project pitches that are equipped with effective marketing communication convey the projects' importance and marketability. Specifically, when the entrepreneurs and the crowdfunding platform users interact via different types of crowdfunding platforms, pitch framing, including the signaling of ADT terms, project location and fundraising goal, becomes imperative to help facilitate crowdfunding success.Design/methodology/approachDrawing on data collected from six leading US-based equity and reward-based crowdfunding platforms in 2020, an empirical study was performed. Using the text analysis approach, the authors examined the positive effects of incorporating technology orientation on crowdfunding success. While the effect between the project description's signaling of geographic location, fundraising goal and articulation style on fundraising success, while controlling for project and platform characteristics.FindingsThe results suggested that the technology-orientated projects are more likely to achieve better fundraising outcomes. Taking crowdfunding platform types, project locations, minimum fundraising goals and articulation with analytical and authentic into consideration, the results still hold.Originality/valueBuilding on the theoretical framework of signaling theory, the authors consider the crowdfunding-specific contextual factors to enhance the understanding of the positivity impact of technology orientation. By such addition, it facilitates more effective strategic composition of entrepreneurs' fundraising conversations.

Backer funding intention in reward-based crowdfunding: service-dominant logic and stimulus-organism-response perspectives

PurposeThe new age of entrepreneurs recognizes crowdfunding as an innovative and effective means of obtaining funding from backers. However, attracting backers is challenging and related scholarly knowledge lacking. Therefore, this study investigates the diverse factors influencing backer funding intention in reward-based crowdfunding.Design/methodology/approachThis study conducted an online survey of 401 registered backers from two reward-based crowdfunding platforms in Taiwan. Data were analyzed using covariance-based structural equation modeling.FindingsResults show that entrepreneur activeness has a negative effect on perceived risk but positively, while entrepreneur activeness and platform interactivity have a positive effect on backer engagement and backer value creation. Although it had no significant impact on backer engagement, project novelty positively influenced backer value creation. Perceived risk had no influence on either backer engagement or backer value creation. Backer engagement positively influenced backer value creation and backer funding intention, with the former having a positive impact on the latter.Originality/valueThis study provides a multi-perceptual lens by proposing an integration of diverse factors such as entrepreneurial- (entrepreneur activeness), project- (project novelty and perceived risk) and platform-related characteristics (platform interactivity) as antecedents to backer funding intention. By integrating a service-dominant logic perspective into the stimulus-organism-response model, this study highlights the essence of value creation by perceiving backers as value co-creators.

Product sampling on reward-based crowdfunding platforms

On reward-based crowdfunding platforms, uncertainty in investment outcome severely hinders transactions between online backers and fundraisers. The industry is dedicated to alleviating these dilemmas through campaign design and platform function design. In recent years, online product sampling has been introduced as a promising promotion instrument for fundraisers. Using a unique dataset of 4,027 campaign-level observations collected from China's highly influential JD Crowdfunding website z.jd.com, this study discusses whether and to what extent a product sampling strategy is beneficial to crowdfunding campaigns. Differences in the strategy's effectiveness across product types are also examined. Empirical results suggest that adopting online product sampling is helpful to crowdfunding performance because it increases the total number of backers, the total fundraising amounts, the average amount of funds raised per backer, the fundraising percentage, and the possibility of campaign success. The strength of product sampling, however, decreases along the search-experience product continuum.

Rethinking investors' herding behavior under the conditions of reward-based crowdfunding platform

PurposeReward-based crowdfunding, an emerging financing channel for SMEs, has attracted significant attention from scholars and practitioners. Scholars have mostly explored investors’ herding behavior in platforms to better understand investors’ decision-making mechanisms and management of funding projects. However, current evidence is inconsistent regarding herding behavior during the funding process. This study proposes prior funding performances have a nonlinear effect on subsequent funding performance and that this nonlinear relationship is conditional on competition intensity and information disclosure.Design/methodology/approachBased on objective data collected from a dominant reward-based crowdfunding platform in China, this study follows a panel ordinary least squares (OLS) model to estimate the effects of prior funding performance on the subsequent funding performance and the moderating role of environmental factors (i.e. competition intensity and information disclosure) in a given platform.FindingsThe results show prior funding performance had an inverted U-shaped effect on subsequent performance; this inverted U-shaped relationship was attenuated when the number of interactive messages was larger and competition was more intense, and it was strengthened when information updates were more frequent.Originality/valueThe effects of prior funding performance on subsequent performance at different stages of the fundraising process and under different platform environments remains unclear. The authors revisit the varying viewpoints in existing research and propose that the enhancement and substitution effects of prior funding performance are dominant at different funding stages. Overall, the results of this study highlight that the crowdfunding platform environment may become a boundary condition for investors' herding behavior.

Matchmaking in reward-based crowdfunding platforms: a hybrid machine learning approach

Traditional clustering methods fail to accurately cluster the feature vectors of backers and macth the potential backers to compatible crowdfunding projects, mainly due to their sensitivity to the setting of the initial value. In this paper, we use the Apriori algorithm in conjunction with other machine learning tools to cluster the potential backers and provide more accurate recommendations for crowdfunding projects. Focusing on potential projects listed in a major reward-based crowdfunding platform, we first train the data obtained from the available list of backers. Using the Apriori algorithm, the degree of association between different project backers is then obtained, and weight calculation of the backers is carried out according to the association degree of the backers. The degree of association is used as a key index to cluster similar backers. Finally, we test the model and determine whether clustering can correctly classify the data in the test set based on the Apriori algorithm. Our experimental results show that there is 90% accuracy, precision and recall of the model. The proposed solution outperforms the other five benchmark methods and offers an imporved matchmaking by connecting the listed crowdfunding projects to the right backers.

Formal Institutions and Relaunching in Crowdfunding: Novice vs Serial Entrepreneurs

The proliferation of international reward-based crowdfunding platforms as a popular source of financing for new ventures has spurred considerable research in recent years. Researchers have examined the individual and transaction-related factors that affect entrepreneurs’ use of crowdfunding platforms. However, they have paid limited attention to examining the effect of the country’s institutional factors on entrepreneurs’ reliance on these international platforms. They have also failed to differentiate between novice and serial entrepreneurs, ignoring the importance of experience in this regard. Using the institutional lens, we discuss the relationship between a country’s formal institutions and entrepreneurs’ campaign launching decisions on these platforms. We probe our research questions using a dataset of 177,499 Kickstarter campaigns launched by entrepreneurs located in the top 25 countries represented on the platform. We complement Kickstarter data with macro-level data from the World Banks’s Doing Business reports and World Development Indicators to perform our multi-level analyses. Our results show that novice entrepreneurs factor policies governing local credit conditions and resolving insolvency in their decision to finance their venture when using international crowdfunding platforms. However, the effect of local credit conditions no longer persists after developing a record of accomplishment on these platforms, becoming serial. As for laws protecting minority investors and resolving insolvency, its effects on the relaunching decision is amplified for serial entrepreneurs. Our findings offer insights into entrepreneurial finance and serial entrepreneurship, which is useful for designing and guiding public policies focused on promoting entrepreneurship.

Entrepreneurial Learning and Disincentives in Crowdfunding Markets

Reward-based crowdfunding has enabled entrepreneurs to interact with consumers even before product launches. However, this market persistently suffers from a high failure rate; that is, entrepreneurs fail to launch and deliver their products as promised. We investigate the extent to which this high failure rate is because of information distortion—entrepreneurs have uncertainty about consumers’ evaluation of the new products. We model the product launch decisions of different types of entrepreneurs who raise funds through preselling on reward-based crowdfunding platforms and subsequently decide whether to continue with the product launch. To do so, we collect structured and unstructured data from Kickstarter’s digital video game category and classify attributes using supervised learning methods. We develop and estimate an integrated model of crowdfunding demand and entrepreneurs’ product launch decisions. We find that the information entrepreneurs gather from crowdfunding sales has sizable impacts on the product launch decisions of entrepreneurs with low managerial capital or new to the crowdfunding platform. Our counterfactual simulations suggest that platform policy regulating overfunded projects can reduce the product launch failure rate by about 13%. This paper was accepted by Matthew Shum, marketing.

Strategy for Improving Crowdfunding Investments in Startup Business

Purpose: This research was conducted to analyze the extent to which online customer reviews (OCRs) can stimulate investment backers as a strategy to increase crowdfunding investment.
 Design / Method / Approach: This research is quantitative. Natural language processing (NLP) processes review text documents based on linguistic study, a lexicon-based method is used for sentiment analysis classification based on polarity score (pros and cons), while Multiple linear regression forms a model or relationship between online customer reviews and crowdfunding investments. OCRs consisting of numeric and text features were collected from one hundred technology products (3D printing, drones, cameras, wearables) on Kickstarter.com.
 Findings: The study results show that, in addition to positive reviews, the number of comments and the number of sentiment reviews can increase consumer interest in investing in technology products on the crowdfunding platform. Moreover, positive reviews have the most positive effect on crowdfunding investments.
 Practical Implications: The study results are expected to be used for startup business, especially technology products as a strategy to increase funding investment on a reward-based crowdfunding platform. Startups can take advantage of online customer reviews as one of important factors in stimulating potential backers and backers to invest.
 Social implications: The strategy of utilizing online customer reviews can be used especially for technology product-based startup business to get funding support as a resource in completing a product development stage.
 Originality / Value: The novelty of this research is that it focuses on a technological product development stage, product campaigns on a reward-based crowdfunding platform, considering online customer reviews through sentimental (online reviews) and numerical characteristics (number of comments, number of sentiment reviews) simultaneously as a strategy to increase investment.
 Research Limitations / Future Research: This study has some limitations as it used only online customer reviews as an attribute that affects crowdfunding investment. Future research is expected to explore online customer reviews to determine important attributes (unique words) as consideration for strategies to increase crowdfunding investment.
 Paper type: Empirical

Effective entrepreneurial narrative design in reward crowdfunding campaigns for social ventures

One of the most important challenges for social venture entrepreneurs is acquiring resources. Reward crowdfunding is considered a suitable tool for meeting the financing needs of social ventures, whose backers are particularly interested in firm ideas and core values rather than in collaterals or business plans. A strategic factor that is able to influence the outcome of crowdfunding campaigns is the entrepreneurial narrative. Very few scholars have examined the key factors that support a crowdfunding campaign, particularly those on reward-based crowdfunding platforms, and the effects of entrepreneurial narratives on investors’ decisions. Aiming to fill this research gap, this paper investigates how entrepreneurs in the technology industry describe their social ventures and projects on Eppela, an Italian reward-based crowdfunding platform. Thematic analysis was applied to detect the five following key factors of effective entrepreneurial narratives in reward-based crowdfunding campaigns for social ventures: 1) problem/need; 2) project; 3) product; 4) team; and 5) venture. Each key factor includes specific subfactors. Lexical data analysis was then performed to identify the following expected effects of the examined entrepreneurial narratives on potential investors, leading these investors to understand, trust, and approve the project proposal, and thus, finance the social venture’s project: 1) reassurance, 2) reliability, and 3) credibility. Based on these results, this study proposes an explanatory model about how to design effective entrepreneurial narratives to be presented to contribute as much as possible to the success of projects in crowdfunding platforms.

What Impacts Backers’ Behavior to Fund Reward-Based Crowdfunding Projects? A Systematic Review Study

Background: With Covid-19 spreading across the world, many economic issues have raised. Effort is continued to support vulnerable individuals and start-ups to survive during this pandemic. Reward-based crowdfunding (RBCF) is seen as alternative sustainable finance in the Fintech industry. It allows fund-seekers to pledge an investment through RBCF platforms such as Kickstarter for funding their projects. Backers will get a reward in return. Research has shown that factors impacting the backers' behavior are crucial in determining the success of RBCF campaigns. However, there is a literature gap in providing a holistic view of these factors. Therefore, this paper aims to review and identify factors impacting backers' behavior by conducting a Systematic Literature Review (SLR). Method: This paper employs the three stages in conducting the SLR. It starts with identifying the review strategy where a search string is developed. A total of 323 papers from 2012 up to 2019 from two main academic databases, i.e. IEEE Xplore and ScienceDirect were retrieved. After applying the quality assessment criteria, 33 papers were qualified for the analysis. Thematic analysis was then applied to thematically categories the identified factors. Results: A large set of factors was identified in the literature. Identified factors were classified under nine main themes. These themes are Team Characteristics, Project Characteristics, Social Influence, User Generated Content, Risk, Distrust, Upfront Marketing, Environment Readiness, and Backers Motivation. Conclusions: This paper contributes theoretically by comprehensively identify factors impacting backers’ behavior toward using RBCF. The findings also contribute empirically, particularly to the fund-seekers, to help them understand what factors might impact the backer’s behavior and enhance their chances of designing a successful campaign.

Skin in the game: Self-funding and reward crowdfunding success

This article focuses on entrepreneurs’ self-funding behavior in the reward crowdfunding context and its relation to crowdfunding success. Theoretically anchoring our discussion in signaling theory, we argue that self-funding sends similar information to that conveyed by quick-fix bootstrapping efforts. Accordingly, we hypothesize that self-funding behavior is positively associated with crowdfunding success as it can help alleviate uncertainties around a fundraiser’s intent and quality as perceived by prospective backers. To show this, we use a sample of 1,583 campaigns collected from Zhongchou, the largest Chinese reward-based crowdfunding platform, to test our hypotheses. Our results demonstrate that entrepreneurs' direct self-funding is positively associated with crowdfunding success. Moreover, this effect is partially mediated by the quality of campaigns’ content elements.

The devil is in the details: The effect of nonverbal cues on crowdfunding success

Many reward-based crowdfunding platforms encourage entrepreneurs to introduce their projects and make a personal appeal with a video clip. In this study, we investigate the impact of such a pitch video on financing outcomes. Grounded in social perception literature, we propose that effective use of nonverbal cues in a pitch video increases funding success. We coded and analyzed videos of crowdfunding campaigns and found that an entrepreneur could improve the funding outcomes by gazing less, appearing early, and reducing speech hesitations in a pitch video. We also found that smiling has no impact on funding success.

Project Recommendation Using Heterogeneous Traits in Crowdfunding

Crowdfunding has gained widespread popularity in recent years. By funding entrepreneurs with creative minds, it is gradually taking over the role of venture capitalists who provide the much needed seed capital to jump start business ventures. Despite the huge success of the crowdfunding platforms, not every project is successful in reaching its funding goal. Therefore, in this paper, we intend to answer the following question "what set of features determine a project's success?". We begin by studying the dynamics of Kickstarter, a popular reward-based crowdfunding platform, and the impact of social networks on this platform. Contrary to previous studies, our analysis is not restricted to project-based features alone; instead, we expand the features into four different categories: temporal traits, personal traits, geo-location traits, and network traits. Using a comprehensive dataset of 18K projects and 116K tweets, we provide several unique insights about these features and their effects on the success of Kickstarter projects. Based on these insights, we build a supervised learning framework to learn a model that can recommend a set of investors to Kickstarter projects. By utilizing features from the first three days of project duration alone, we show that our results are significantly better than the previous studies.