THE PHENOMENON OF PROJECT OVERFUNDING ON ONLINE CROWDFUNDING PLATFORMS – ANALYZING THE DRIVERS OF OVERFUNDING

On online crowdfunding platforms, three stakeholder groups, i.e., platform operators, project found-ers, and funders, encounter each other and influence funding outcomes by their actions and behaviors. Interestingly, among the successfully funded projects, some projects are heavily overfunded. By our research paper, we address this phenomenon of project overfunding. Especially in reward-based crowdfunding, massive overfunding can lead to severe problems for project founders when vast amounts of rewards have to be delivered. Some people even argue that the amount of money that leads to overfunding should better be pledged to good but undervalued projects that fail to reach their fund-ing goal. However, it is also a powerful mean to generate publicity and to sell products. In order to help understanding this phenomenon, we analyze its drivers. Our analysis gives evidence for all three stakeholder groups contributing to overfunding. We provide arguments for all three stakeholder groups to have certain egoistic incentives for a further backing of already funded projects instead of prioritizing a more demand-oriented distribution of funding. Our findings extend the understanding of funding processes on crowdfunding platforms and are of high interest for practitioners in the field

Campaign overfunding and bounded rationality in equity crowdfunding

In the 21st century, a new way of raising funds called crowdfunding has taken off. Among the variety of different crowdfunding subcategories, equity-based crowdfunding has gained popularity, as regulators have opened up the market. While the money is flowing into the campaigns in increasing amounts, a phenomenon called overfunding has become more pronounced. This paper adds perspective to the drivers of overfunding in equity crowdfunding while also looking at the crowd’s decision-making process affecting the phenomena. The study follows previous research made by Koch (2016) in the reward-based context and the work of Herbert Simon (1947), and Kahneman and Tversky (1974) in the behavioral finance literature. Explorative and quantitative research methods are used jointly to study the progress of overfunding due to the lack of comprehensive previous studies. Invesdor Oy, a dominant player among the equity crowdfunding platforms in the Nordics (Lukkarinen et al., 2016: 6), provides the data for this report. The information encompasses 185 projects from the opening of the platform in 2012 up till September 2017. The platform operates on an ‘all or nothing’ model where the money returns for the investor if the campaign does not reach the initial funding target. However, the campaigns can exceed the initial target by large margins as projects can continue to receive contributions until the deadline. Consequently, the maximum amount sought can differ extensively from the original goal. A ratio of finally reached funding X and the initially defined funding goal Xgoal measures the overfunding phenomena. Studying campaign conditions, information disclosure, external context and project segmentation, the study demonstrates that duration, forum posts and external investments are associated with overfunding in equity crowdfunding. The shorter the campaign duration, more pronounced is overfunding. The finding diverges from the earlier overfunding study made by Koch (2016) in the reward-based crowdfunding setting. In addition, the more forum posts and external investments from angel investors the campaign gets, the stronger is overfunding. The finding is similar to earlier reports on overfunding (Koch, 2016; Virtala, 2017) which have examined the effects of communication and external help to campaign success. Percentage-wise, overfunding seems to be a more pronounced phenomenon in equity- than reward-based crowdfunding. Furthermore, the explorative research design suggests that especially present heuristic, herding behavior, anchoring, collective conservatism, satisficing and vividness will affect the overfunding phenomena. In addition, the study has implications for practitioners. With closely the same amount of effort and resources, small enterprises could exceed their funding targets and eventually accelerate their growth story. Moreover, regulators and platform operators should take into consideration the possible drawbacks of the crowd’s heuristics and deliberate spreading of misinformation: some stakeholders could use them as their own advantage without thinking the potential harm for the whole community

The characteristics of Bulgarian reward-based crowdfunding campaigns

Reward-based crowdfunding is the most popular method for acquiring financial resources directly from potential users. Bulgarian entrepreneurs and small companies have the opportunity to search for funding from international online communities that are active in the biggest reward-based crowdfunding platforms as Kickstarter and Indiegogo. The proposed paper aims to examine the current state and characteristics of the Bulgarian campaigns in Kickstarter, to identify success factors for generating funds and give directions for better performance of Bulgarian entrepreneurs in reward-based crowdfunding

Relasi Antara Filantropi Melalui Crowdfunding dengan Nilai Selebritas

The activity of crowdfunding through the internet-based platform is becoming a usual thing in Indonesia. Some celebrities do this kind of activity in the context of birthday crowdfunding. The objective of this research is to analyze the relations between celebrity’s philantrophy through crowdfunding and its implication to the celebrity. This is a quantitative research with questionnaire as the data collection instrument to analyze the impact of crowdfunding to the value of Indonesian celebrity, Luna Maya. The findings of this research show the impact that arise from internet-based platform that enabling celebrity to build her visibilities on public’s opinion through crowdfunding.Keywords: celebrity, crowdfunding, philantroph

Determining key drivers of crowdfunding success and exploring the social nature of crowdfunding

Initially seen as a way for individuals to raise money for causes or projects through the collective effort of friends and family, crowdfunding provides start-ups the opportunity to bypass traditional financing methods, and instead raise capital for their venture from customers and investors. Unlike traditional investing, crowdfunding success relies on a large number of individuals giving small amounts of money. This means crowdfunding campaigns are constantly looking to increase their chances of success, and stand out from other campaigns. In order to do this, crowdfunding campaigns are increasingly using social media to convey their message and project across to potential backers. Therefore, the objective of this thesis is to identify key drivers that impact crowdfunding success and explore the social nature of crowdfunding. This thesis was initiated by a literature review that examined factors that impact the success of crowdfunding campaigns. While providing a comprehensive background on the determinants of success, this study also illustrates several potential avenues for future research. First, it highlights the lack of research surrounding discussion around the campaign outside of the crowdfunding platform, particularly with equity crowdfunding. This study also shows the need for more research exploring how successful campaigns were after the crowdfunding campaign. After this literature review, the first quantitative study analyses how campaigns use social media to communicate with the crowd outside of the crowdfunding platform. Findings show that engagement with the crowd on social media positively impacted the success of crowdfunding campaigns. This study also suggests that, while within-platform information sharing influences the overall funding, it is the multi-platform information sharing across social media that allows fundraising to exceed initial targets and tap into different social bonding behaviours (hedonic funding). Building on research into social media and equity crowdfunding, the third study examines rewards-based crowdfunding, analysing how the fundraiser’s social network changes over the course of the campaign. Findings from this paper show that the strength and breadth of the social network can impact whether the campaign reaches its funding goal. The final study explores the second gap found in the literature; the lack of research surrounding the success of crowdfunding campaigns post-fundraising. This research paper examines the impact a crowdfunding campaign has on public sentiment, analysing how sentiment changes in the six months after the campaign. This thesis has implications for theory, practice, and future research. First, I provide a novel perspective on crowdfunding success, showing it is not only reaching a funding target, but should be measured across different stages of the campaign. This thesis also introduces the idea that crowdfunding is a social collaboration. Through unique analysis of these campaigns and backers, along with the relationship between social media and crowdfunding, I find several factors that influence the success of campaigns. Finally, this thesis also highlights a number of interdependencies that exist, which can also impact the success of campaigns. These findings and implications are discussed at length in the final chapter

Equity crowdfunding and early stage entrepreneurial finance: damaging or disruptive?

Equity crowdfunding (ECF) offers founders of new ventures an online social media marketplace where they can access a large number of investors who, in exchange for an ownership stake, provide finance for business opportunities that they find attractive. In this paper, we first quantify the evolution of the ECF market in the UK, the world leader, as well as the benign regulatory environment. ECF already represents more than 15% of British early stage entrepreneurial finance. We then use qualitative methods to explore three research questions. First, do these large financial flows via ECF platforms supplement or merely divert more traditional forms of funding for entrepreneurs? Second, do investors understand and appropriately evaluate the risks that they are bearing by investing in this new asset class? Finally, does ECF finance bring with it the spillovers, e.g. advice and guidance critical to entrepreneurial success, associated with other sources of funding such as Venture Capital? Our study is based on extensive interviews with investors, entrepreneurs (including some who chose not to use ECF in favour of traditional funding sources) and regulators. We conclude that ECF provides real additionality to the sources of entrepreneurial finance while not bringing major new risks for investors. This suggests other jurisdictions might consider implementing the British “principles based” regulatory framewor

The Power of Words in Crowdfunding

In this chapter, the authors first provide an overview of the crowdfunding phenomenon. Through the literature review of crowdfunding success factors in the four models, the authors then summarize that the current entrepreneurial research focused on success factors has failed to sufficiently examine how the power of words would affect crowdfunding. Therefore, the authors propose that non-verbal and verbal cues are crucial to entrepreneurial financing success. Based on the insufficient research related with those cues, especially the non-verbal ones, the authors open an area of study on non-verbal and verbal cues in the entrepreneurial financing process by conducting and writing this chapter

THE NEW ENTREPRENEURIAL LANDSCAPE AND THE VALUE CO-CREATION PROCESS: THE ROLE OF THE CROWD IN THE PRE-PURCHASE CROWDFUNDING

The entrepreneurial finance landscape is changing very rapidly (Block, Colombo, Cumming, Vismara, 2018). New players have emerged, with a determinant contribution of the technological revolution. The resources interplay in the peer-to-peer business and network has led to the development of new financing instruments able to boosting innovation and the creation of new ventures. Social and economic innovation is searching new ways to emerge; this requires new models for interpreting the enlarged notion of value in the crowd/entrepreneurs relationship. Despite the rapid growth of alternative finance, the academic literature on crowdfunding as a new financing model able to reduce financing constraints for firms, still lack evidence whether and how these new players and their investment approach are transforming the entrepreneurial landscape. In particular, the reference is to the complex mix of economic and social expectations deriving from the participation to the pre-purchase crowdfunding mechanism. Findings from the explorative study suggest that the pre-purchase mechanism is leading to the configuration of new market niches, where supporters act as an informed investor and consumers. Additionally, the joint value created by the efforts made by entrepreneurs and the crowd, creates sounder positive externalities, those favor growth possibilities to survive of the new ventures

When the crowd becomes shareholder: an enquiry on Italian Equity Crowdfunding initiatives

This thesis aims at providing a valuable contribution in the field of Italian Equity Crowdfunding, which is currently experiencing its most successful period and consequently is being characterized by continuous updates in recorded volumes; symptomatically, the amount of equity subscribed in the first nine months of 2017 has already overcome the whole subscriptions obtained since the first deal has been hosted in 2014. The main research areas that have been covered consist in the platforms’ ecosystem and the whole Italian ECF campaigns launched until September 2017; for both of them descriptive and statistical analyses have been conducted, aiming at representing in the most effective way the current status of pla