The experience matters: participation-related rewards increase the success chances of crowdfunding campaigns

ABSTRACT

Crowdfunding recently emerged as an alternative funding channel for start-ups, creative artists and social endeavors. On specialized web platforms, project creators ask the crowd for support and provide in return a set of rewards, modulated according to the amount of support pledged. We analyze the role played by the type of reward in mobilizing pledgers; specifically, we look at self- and social-image enhancing rewards and to what extent they determine project success. Our data consist of the pledges to 346 projects hosted by Startnext, the biggest crowdfunding platform in Germany. We show that higher shares of reward levels that let pledgers participate in and experience the project are correlated with project success. Our paper contributes to the literature on the motivation driving pledgers in reward crowdfunding. A practical implication for the managing of a successful campaign is to employ the reward levels as a tool to involve the crowd in the project.

KEYWORDS:

• Crowdfunding
• entrepreneurial finance
• donations
• reward levels
• identity
• self-image
• social image

JEL CLASSIFICATIONS:

• L26
• D03
• G32

Acknowledgments

We are grateful to Startnext, especially Anna Theil, for providing the data and valuable discussions. We would like to thank Armin Schwienbacher and audiences in Mannheim, Jena and at the 6th Crowdinvesting Symposium in Munich for feedback. Daniel Meyer and Javier Changoluisa provided excellent research assistance.

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

1 See Agrawal, Catalini, and Goldfarb (2014), Belleflamme, Omrani, and Peitz (2015), Moritz and Block (2016), Short et al. (2017), Butticè et al. (2018) for recent surveys of the crowdfunding literature.

2 Startnext employs the threshold pledge model, as Kickstarter. If pledges reach the target amount by the deadline, the project is funded and pledges are paid; else, no transaction takes place.

3 See, more generally, the social psychology literature on social identity theory (Tajfel and Turner 1979).

4 See Crosetto and Regner (2018) for another study based on this dataset. The focus of that earlier paper is on funding dynamics and the extent of self pledges.

5 We drew 360 projects, without replacement, uniform random from the set of all Startnext projects for which we have data. We then crawled the resulting projects to retrieve reward level information from the Startnext web site. Because of malformed URLs and other technical details we could meaningfully crawl only 346 out of the 360 projects. We decided not to add further draws to fill in the 14 missing projects to avoid adding bias.

Additional information

Funding

Tobias Regner gratefully acknowledges support by Deutsche Forschungsgemeinschaft (DFG, German Research Foundation) - project number 628902.