authors NUNO MOUTINHO / PEDRO LEITE e-mail moutinho@fep.up.pt / pedromirandaleite@gmail.com

PORTO, NOVEMBER 8, 2013

University of Porto (UP)CEF.UP, CETAC.MEDIA

SHARING INFORMATIO N IN A VIRTUAL COMMUNITY OF

CROWDFUNDI NG :the case of Kickstarte r

Definition

Literature Review

Analysis Quantitative Qualitative

Conclusions

Roadmap

crowdfunding

Definition

crowdfundingwhat does

mean?

crowdfunding

“ Crowdfunding is a tool that is emerging as an

alternative to traditional forms of financing”

“It occurs when a large group of people, seen as the crowd, agrees to collaborate with small

amounts of money to a project, in exchange for a reward”

452 active platforms in April 2012 (Massolution)

crowdfunding

Definition

Definition1. Entrepreneur conceives a business idea and decides to implement it.

CHARACTERIZATION OF THE CROWDFUNDING PROCESS

BUSINESS IDEA IS CONCEIVED

PLATFORM IS SELECTED

PROJECT IS DEFINED

INITIATIVE IS APPROVED AND GOES PUBLIC

CONTRIBUTIONS ARE MADE FROM THE

CROWD

END OF DEADLINE

INITIATIVE IS IMPLEMENTED

REWARDS ARE DISTRIBUTED

4. If requirements are met, project is accepted in the platform, and is made available to the crowd. Entrepreneur advertises the initiative through his circles.

3. A video and a description of the project are built; the deadlines, rewards and finacial goals are defined. Information is submited to the platform.

2. Selects crowdfunding as fundraising method. Then, he chooses the platform according to the nature and the goals of the initiative.

5. During this timeline, project stands in the front of the world, and contributions are accepted for each level of reward.

6. At the end of the deadline, project may reach, exceed or fall below its financial goals. If it fails, the amount collected never leaves the investors’ account. There are no limits for amounts collected.

7. If successfull, initiative is implemented according with the description.

8. After the previous, rewards are produced and distributed, and in many cases the venture proceeds with activity.

crowdfunding

Literature Review

Crowdsourcing

outsourcing + crowd Innovation

open innovation lead user theories innovation characterization impact diffusion processes product life cycle relation with rhizome

Power of the crowd why is a crowd different from an individual

crowdfunding

Research

Largest crowdfunding platform to date. Funding of initiatives that belong to the creative industries.crowdfunding

Research

Collected information about all successful projects

Since May 2009 until February 2012

2,75 years

total of 18.430 initiatives

crowdfunding

Quantitative analysis

crowdfunding

Financing Rate = Capital pledgedgoal ≥ 1

(1) number of the project (2) name of the project(3) date of funding (4) short description of campaign(5) pre-determined goal in dollars(6) capital pledged in dollars(7) financing rate(8) number of backers(9) average contribution in dollars(10) category of the project(11) sub-category of the project(12) number of comments from backers(13) number of updates from the

entrepreneur(14) number of levels of reward (15) city (16) state (17) country (18) name of the entrepreneur (19) number of other projects backed

by the entrepreneur(20) URL to the project

Stability tests Ordinary Least Squares (OLS)

Stepwise Method

Quantitative results

$128.333.380,96 collected

average goal of $5.000 per project

average collection of $6.963,29 per

project

average of 95 backers per project

average contribution of $81.42

crowdfunding

Quantitative results

crowdfunding

Quantitative results

crowdfunding

Quantitative results

Category Number of projects % Collected %

Art 1749 9% $ 7.551.031,00 6%

Comics 422 2% $ 3.576.117,84 3%

Dance 428 2% $ 1.418.837,00 1%

Design 506 3% $ 14.807.199,00 12%

Fashion 260 1% $ 1.549.196,00 1%

Film&Video 5164 28% $ 41.304.377,00 32%

Food 430 2% $ 3.852.034,00 3%

Games 405 2% $ 4.655.087,00 4%

Music 5578 30% $ 28.405.638,12 22%

Photography 584 3% $ 2.798.028,00 2%

Publishing 1249 7% $ 6.349.992,00 5%

Technology 231 1% $ 6.491.232,00 5%

Theater 1424 8% $ 5.574.612,00 4%

crowdfunding

Quantitative results

crowdfunding

average return of

the project

Quantitative results

crowdfunding

Methodology:

• OLS with stepwise method

• It adds predictor variables to the regression that

best correlate with the dependent variable and

subtracts predictor variables that least correlate.

• This way one generates a regression equation

using only the predictor variables that make a

significant contribution to the prediction.

Quantitative results

Variables Coefficients t Sig.

(Constant) 114,427 24,084 ,000

Backers ,289 36,430 ,000

Project category: Design 115,538 9,798 ,000

Comments -,092 -6,490 ,000

Project category: Games 45,910 3,562 ,000

Entrepreneur backed 1,090 4,016 ,000

Project category: Fims&Video -14,637 -3,288 ,001

Levels of reward -1,677 -3,629 ,000

Project category: Technology 52,026 2,857 ,004

Updates ,747 2,494 ,013

Project category: Art 13,770 2,069 ,039

crowdfunding

Significant variables towards the financing rate:

• backers; comments; updates; nº projects

backed by the entrepreneur; design, technology

and games categories

• music and film&video have higher number of

financed projects but small average returns

• design a simple reward system

crowdfunding

Quantitative results

Qualitative analysis

• case study with 6 projects:

higher financing rate within the categories

positively related to success: games, design and

technology

the highest financing rate in the films & video

(category that holds a negative relationship with

success)

the highest financing rate of all projects

the black sheep – the closest to failurecrowdfunding

Qualitative analysis

• We performed a survey to 6 specialists

(investors, entrepreneurs, platform managers,

fundraising activities).

• Each person received the link for each project

and was asked to complete an online

questionnaire.

• The idea was to form a juri of specialists .

crowdfunding

Tephra: the Steampunk RPG

crowdfunding

RPG Board Game

Higher financing rate in Games category

Tephra: the Steampunk RPG

crowdfunding

Critical factors of success:

“they attacked an audience that is typically passionate for

this hobby, which is typically open-minded and eager to

spend more” Platform Manager

“rewards are well designed and fair, which makes sense for

who wants to play the game” Fundraiser

crowdfunding

3D Printer

Higher financing rate in Technology category

Printrbot: Your First 3D Printer

Printrbot: Your First 3D Printer

Critical factors of success:

“the possibility of having this object at home is attractive and

seems to convince whoever has that financial capability”

Entrepreneur

“in a global perspective, the project is very realistic in the

communication, in the goal and reward fields” Platform

Manager

considering that lowest level was at $499

crowdfunding

Elevation Dock: The Best Dock For iPhone

crowdfunding

Dock for the iPhone phone

The Highest financing rate in our sample

Elevation Dock: The Best Dock For iPhone

crowdfunding

Critical factors of success:

identification of benefits for the consumer

quality of construction

accessory for a successful product

original, unique and design object

opportunity to buy cheaper and before ($79 instead of $120)

“preoccupation to show the human character of the

entrepreneur” Investor

Qualitative Results

Critical factors of success:

A higher enrollment of consumers means more backers

Show tangibility (prototype or technical illustration)

Invest in the planning with a good concept, video and description

Offer attractive rewards, and added value to higher levels

Create sense of urge

Appealing rewards to the masses or niche

Communication and advertisement

Give attention to interaction

crowdfunding

Conclusions

Crowdfunding can finance entrepreneurial ventures. It is essential to:- involve backers and raise their number; - design a simple rewards system with lower number of levels of rewards; - be an active entrepreneur within the platform, backing other projects (crowdfunding is also a social media platform);- make good use of video and description tools.

crowdfunding

make good use of video and description tools.

authors NUNO MOUTINHO / PEDRO LEITE e-mail moutinho@fep.up.pt / pedromirandaleite@gmail.com

PORTO, NOVEMBER 8, 2013

University of Porto (UP)CEF.UP, CETAC.MEDIA

SHARING INFORMATIO N IN A VIRTUAL COMMUNITY OF

CROWDFUNDI NG :the case of Kickstarte r