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Please quote as: Gierczak, M. M.; Bretschneider, U.; Haas, P.; Blohm, I. &
Leimeister, J. M.(2015): Crowdfunding Outlining the New Era of
Fundraising. In: Gajda, O. & Brüntje, D. (Eds.), Crowdfunding in Europe State of
The Art in Theory And Practice; FGF Studies in Small Business and
Entrepreneurship (pp. 7-23). Cham: Springer Science + Business Media.
Crowdfunding: Outlining the New Era
of Fundraising
Michael M. Gierczak, Ulrich Bretschneider, Philipp Haas, Ivo Blohm,
and Jan Marco Leimeister
Abstract Crowdfunding is increasingly gaining attention in theory and practice.
Various platforms have emerged, offering entrepreneurs and project owners the
possibility to raise money from an undefined group of online users (“crowd”). In
this article we aim to provide a deeper understanding of the rise of crowdfunding as
an alternative funding opportunity by discussing its main characteristics, the market
development, different classification approaches, its fields of application and by
providing directions for future research.
Keywords Crowdfunding • Crowdinvesting • Crowdsourcing • Crowdfunding
types • Crowdfunding platforms
1 Introduction
The development of Web 2.0 technologies within the past decade has enabled the
evolution of new and innovative business models, in which the digital user plays an
increasingly important role by changing the way goods are being used and con-
sumed (Brenner et al., 2014). This digital user is no longer located at the end of the
value chain. He is an integral part of it, a co-decision-maker. This change requires
whole industries to think and act differently leading to a fundamental transfor-
mation from offline business models to digital ones. In this context, crowdsourcing
is a striking example. It describes the outsourcing of various tasks to an undefined
group of people using information technologies (Blohm, Leimeister, & Krcmar,
M.M. Gierczak (*) • U. Bretschneider
Information Systems, Kassel University, Pfannkuchstraße 1, 34121 Kassel, Germany
e mail: michael.gierczak@uni
P. Haas • I. Blohm
Institute of Information Management (IWI), University of St. Gallen, Mu
¨ller Friedberg Strasse
8, 9000 St. Gallen, Switzerland
J.M. Leimeister
Information Systems, Kassel University, Pfannkuchstraße 1, 34121 Kassel, Germany
Institute of Information Management (IWI), University of St. Gallen, Mu
¨ller Friedberg Strasse
8, 9000 St. Gallen, Switzerland
©Springer International Publishing Switzerland 2016
D. Bru
¨ntje, O. Gajda (eds.), Crowdfunding in Europe, FGF Studies in Small
Business and Entrepreneurship, DOI 10.1007/978 3 319 18017 5 2
2013; Leimeister, 2012). It helps companies to develop new ideas and innovations
by including customers’ needs and requests in the innovation process (Chesbrough,
2006). Crowdsourcing approaches often aim to benefit from the wisdom of the
crowd (Surowiecki, 2004) and from collective intelligence (Leimeister, 2010).
One of the main crowdsourcing forms besides crowdvoting and crowdcreation
is crowdfunding (Howe, 2006;Leimeister,2012). It can be defined as an open call
mostly through the Internet for the provision of financial resources by a group of
individuals instead of professional parties either in form of donations, in exchange for a
future product or in exchange for some form of reward (Belleflamme, Lambert, &
Schwienbacher, 2014;Schwienbacher&Larralde,2012). Using a proverb,
crowdfunding can be described as “many alittlemakesamickle”, meaning that a
large amount of money can be raised by accumulating small contributions from a large
group of backers. Therefore, using Internet platforms as intermediaries between indi-
viduals, start-ups or companies on the one hand, and potential backers on the other, the
process of fundraising is sourced out to the crowd (Moritz & Block, 2014).
Being referred to as an innovative method of funding, the basic idea of
crowdfunding is not a new phenomenon. A frequently cited example of early
crowdfunding is the pedestal of the Statue of Liberty. In 1885, Joseph Pulitzer, at
that time publisher of New York’s newspaper “World”, asked the citizens of
New York for a financial contribution to the pedestal of the statue. In return, he
offered to print the name of each backer in his newspaper. After 5 months, the
“World” announced that the donation campaign had reached US$102,000. Remark-
ably, the funds of New Yorkers who donated less than US$1 made up for 80 % of
the grand total (Harris, 1986). More recent examples include the 2008 election
campaign of US-president Barack Obama. Obama’s team managed to raise three-
quarter of a billion USD by crowdfunding. Of note, about half of the overall
donation sum was raised by contributions under US$200 (Kappel, 2009). Up-to-
date various ventures, start-ups and individuals have already applied the method of
crowdfunding (Bradford, 2012). Successful examples of crowdfunding campaigns
reaching wide public attention are, for instance, the movie Stromberg (2011), a
cinematic version of a German sitcom (BRAINPOOL Artist & Content Services
GmbH, 2013) which raised 1 million euros in total in less than 1 week and Coolest
Cooler, a portable cooler that includes extra-functions (e.g. an integrated blender
and bluetooth speakers). Coolest Cooler was funded on Kickstarter attracting
62.642 backers and raising US$13,285,226 (Kickstarter, 2014a).
Since 2007 crowdfunding is gaining attention both in theory and in practice.
Different researchers from all over the world investigated crowdfunding by pro-
viding new insights in this emerging research field and thus creating different
views. The purpose of this article is to consolidate some of these research streams
by providing a holistic view on crowdfunding and crowdfunding-related topics as
well as shedding light on the crowdfunding market in general, discussing current
views on crowdfunding and its types and principles, identifying common fields of
application and discussing potential future research directions. Our article will help
8 M.M. Gierczak et al.
to understand crowdfunding as a new and important possibility of fundraising that
has a great economic and social value.
2 The Crowdfunding Market
The crowdfunding market is still growing. The modern, digitised form of
crowdfunding has its roots in the beginning of this century. Many of today’s largest
crowdfunding platforms are from the US and were launched from 2005 onwards. In
2010, the crowdfunding wave swapped over to Europe. From this moment on,
crowdfunding started to particularly gain momentum in the UK, Germany and the
Netherlands, the most mature European crowdfunding markets. The overall market
numbers indicate an impressive development of crowdfunding. According to the
Crowdfunding Industry Report 2013, over 800 crowdfunding platforms are cur-
rently active or in the process of being built (Massolution, 2012). The total volume
is projected to US$5.1 billion in 2013 (Massolution, 2012). The biggest
crowdfunding platform, Kickstarter, has already reached a total of US$1 billion
of funds in 2014 (Kickstarter, 2014b). Nevertheless, crowdfunding has not yet
reached its full potential. The growth of the crowdfunding market is not only
limited to the US. Current figures from the European market show an increase in
demand (Fu
¨, 2014). In Germany there are 66 active crowdfunding
platforms over which 19 million euros has been raised in 2013 (Blohm, Leimeister,
Wenzlaff, & Gebert, 2013). Compared to 2012, the funding volume has doubled.
With a share of 25 % of the global crowdfunding volume, the European
crowdfunding market is the second largest in the world (Massolution, 2012).
The overall results of a Delphi study carried out by the University of St. Gallen
in early 2014 show that the growth of the crowdfunding market will continue in the
next years (Blohm et al., 2014). In this study, 70 experts were asked in two rounds
on the future development of the crowdfunding industry in Germany, Switzerland
and Austria. In detail, the experts think that the global crowdfunding volume will
rise up to US$35 billion in 2020. In the same period, the crowdfunding volume of
the German market is expected to rise up to 359 million euros (median). The most
significant growth is expected in profit-oriented models, such as equity-based and
lending-based crowdfunding. According to the experts, these two models will reach
a market share of around 60 80 %, both globally and in Germany. Looking at the
years ahead, the experts are convinced that crowdfunding in Germany will be able
to continue to grow, in particular helping creative projects (97 %), start-ups (87 %)
and young growth companies (92 %) to raise money (see Table 1).
Crowdfunding: Outlining the New Era of Fundraising 9
3 A Classification of Crowdfunding
3.1 Crowdfunding Principles
Crowdfunding typically contains three participating stakeholders: the project initi-
ators who seek funding for their projects, the backers who are willing to back a
specific project, and the matchmaking crowdfunding platforms acting as interme-
diaries (Belleflamme et al., 2014). Figure 1illustrates the crowdfunding principle,
containing the three mentioned stakeholders. Each stakeholder type shows differ-
entiating characteristics, which have to be considered by attempting to describe
basic principles of crowdfunding. Based on these basic principles, three archetypes
of crowdfunding can be derived.
3.1.1 Project Initiators and Backers
Most frequently, project initiators and backers are private persons (Gerber, Hui, &
Kuo, 2012; Verstein, 2011). However, organisational project initiators, like start-
ups or non-governmental organisations (NGOs) can be found as well (Belleflamme
et al., 2014; Bradford, 2012; Schwienbacher & Larralde, 2012). Furthermore, the
recent adoption of the JOBS Act in the USA indicates that there are also
organisational backers (Mollick, 2014; Ordanini, Miceli, Pizzetti, & Parasuraman,
Most research on the crowdfunding stakeholders refers to backers. Studies find
that the investment decision of backers is influenced by social networks (Lin,
Prabhala, & Viswanathan, 2013; Zvilichovsky, Inbar, & Barzilay, 2013), herding
(Burtch, 2011) and free-riding behaviour (Burtch, Ghose, & Wattal, 2013). Lin,
Boh, and Goh (2014) summarise that crowdfunding is manifold and addresses
diverse interests. Backers also differ in their motivation for participation
Table 1 Development of the fields of application of crowdfunding by the year 2020 (Blohm et al.,
Crowdfunding for…
German-speaking market (Germany,
Switzerland, Austria) Global market
Private persons 4 28 64 4453 40 2
Creative projects 40 57 2064 36 0 0
Start-ups 51 36 11 2 70 23 6 0
Young growth companies 13 79 9 0 19 74 60
Small and medium
6 36 57 0 9 40 51 0
Large corporations and
multinational groups
0 0 36 64 0 0 40 60
10 M.M. Gierczak et al.
Funding Mechanism In contrast to traditional financial intermediaries,
crowdfunding platforms do not borrow, pool, and lend money on their own account.
They focus on the matching of project initiators and backers by providing infor-
mation about the projects and functionalities, e.g. for reducing the risks of the
investment. Therefore, crowdfunding intermediaries provide particular funding
mechanisms, such as pledge levels, minimum pledge amounts and the all-or-
nothing-/keep-it-all-principle (Gerber et al., 2012; Mitra & Gilbert, 2014; Mollick,
2014; Walsh, 2014).
Project initiators define levels of possible pledge amounts. Each pledge level
implies a certain return, which increases with higher pledge amounts (e.g. a post-
card for 5 euros, or a poster for 10 euros). A minimum pledge amount represents the
lowest possible sum, which can be pledged by the backers. The minimum level of
the pledge amount varies widely from almost zero, e.g. for charity projects, up to
100 or 1,000 euros for start-up funding. Central to most crowdfunding platforms is
the all-or-nothing-principle (Cumming, Leboeuf, & Schwienbacher, 2014).
Following the all-or-nothing-principle, project initiators are only paid out the
collected amount in case they reach their pre-defined funding goal. This is based
on the assumption that backers are only able to accomplish their project and to
deliver the promised returns if they have the complete resources required for doing
so. However, some crowdfunding platforms are based on a keep-it-all-principle in
which project initiators receive any collected sum (Gerber et al., 2012). This
funding principle is particularly used for charitable projects or projects which use
crowdfunding as a subordinate source of funding (Blohm, Leimeister, Wenzlaff,
et al., 2013).
Specialisation The Internet economy is characterised by so-called hyperspecia-
lisation (Malone, Laubacher, & Johns, 2011). Serving the highly heterogeneous
needs and requirements of project initiators and backers, crowdfunding platforms
focus on specific niches and serve a particular segment of the crowdfunding market.
Thus, crowdfunding platform specialisation may reach from innovative and crea-
tive projects or products (Agrawal, Catalini, & Goldfarb, 2010), start-ups and new
businesses (Ahlers, Cumming, Gu
¨nther, & Schweizer, 2012; Schwienbacher &
Larralde, 2012) to sustainability and charity projects (Burtch et al., 2013).
Support and Return Type The most obvious characteristic of a crowdfunding
platform is the type of return provided by the project initiator. In crowdfunding,
project initiators offer a bandwidth of possible returns, reaching from altruistic
returns to financial compensation. From a legal perspective, Bradford (2012)
distinguishes five returns: (1) No compensation The backer makes a donation in
order to support projects for the greater good. (2) Reward The backer receives a
non-monetary return. (3) Pre-ordered product The backer’s support is a prepay-
ment for a product. (4) Interests The backer participates in a loan. (5) Profit shares
The backer receives equity shares from the project (e.g. a start-up). The degree of
complexity for the provision of capital and theresultingreturnsincreasefromdonation,
rewards, pre-selling, lendingandequity,asshowninFig.2(Hemer, Schneider,
Dornbusch, & Frey, 2011).
12 M.M. Gierczak et al.
provide small- and medium-sized enterprises with capital to fund certain projects,
or enable the realisation of creative, altruistic, ecological, and social projects
(Belleflamme, Lambert, & Schwienbacher, 2010). All of these projects frequently
reflect some sort of niche project or projects that have a strong regional focus. As a
consequence, crowdfunding offers not only the possibility of raising money for
start-ups and new ventures but also makes funding possible for niche projects which
perhaps are perceived as non-profitable, and thus are not able to raise money from
traditional sources. Therefore, crowdfunding not only enables prominent and lucra-
tive projects to be funded but also helps to develop less prominent projects. Thus,
crowdfunding may be described as an emerging long tail offer in the financial
service industry.
(Pre-)Sales This form of application of crowdfunding involves businesses
collecting payments in advance for products to be delivered at some later point of
time (Hemer et al., 2011). Doing so, the fix costs of producing a product can be
financed before production starts. In most cases, project initiators collect money to
develop a future product, which usually exists only in form of a prototype. The
project initiator guarantees the delivery of the final product in return for the
contributor’s pledge. The value of the pledge is determined by an assessment of
the market value of the product. During the campaign, products might be offered at
a discounted price to encourage potential backers to support the crowdfunding
Marketing Crowdfunding is heavily based on social media and online communi-
cation, radically simplifying the sharing of information about a crowdfunding
project across geographical borders (Agrawal et al., 2010). For backers, promoting
crowdfunding projects by forwarding information to friends and other interested
parties is very easy and much faster than using offline techniques due to decreased
transaction costs. Due to their financial investments, backers frequently show a high
level of involvement, making use of the available communication tools in order to
create awareness for projects. As a consequence, crowdfunding enables the creation
of viral marketing effects.
Market Research Due to the fast, easy, and not geographically limited access to
capital, the rapid exchange of information with potential backers allows for an
initial testing of business ideas (Mollick, 2014; The World Bank, 2013). In this
regard, successfully funded or even overfunded projects may serve as acceptance
tests of potential products and value propositions. As potential customers do have to
invest their money, crowdfunding might be more apt to elicit the true beliefs
regarding a product or a service than rating scale based product evaluations and
other crowdsourcing approaches (Riedl, Blohm, Leimeister, & Krcmar, 2013).
Co-creation Many crowdfunding projects have benefited from the crowd’s feed-
back. This feedback can reach from simple questions regarding a future product or
service, to concrete suggestions for improvement, or even innovative new ideas.
Crowdfunding, therefore, is based on the fundamental idea of co-creation, in the
Crowdfunding: Outlining the New Era of Fundraising 15
sense that customers or backers are directly integrated into value creation (Blohm,
Leimeister, & Krcmar, 2013).
4.2 Challenges
Besides the manifold potentials, crowdfunding as a source of financing may also
pose some challenges. Uncertainty and risk for backers and cost of capital for the
project initiator are the most important ones.
Uncertainty and Risk Usually, the investment decisions of backers are not based
on solid financial data but influenced by a high degree of emotionality and various
decision biases, such as herding or supporting regional projects (Agrawal et al.,
2011; Burtch et al., 2013). As a consequence, the funding usually implies risk and
uncertainty. For instance, backers may not receive the return as specified. In this
regard, start-ups going bankrupt or delayed delivery of pre-sold products are among
the most prevalent problems (Gierczak, Bretschneider, & Leimeister, 2014). How-
ever, crowdfunding does not only include uncertainty for backers but also for
project initiators. For instance, many project initiators who use crowdfunding as
pre-sales mechanisms do not possess scalable production facilities. As a conse-
quence, many products and other rewards are delivered with delay, potentially
damaging the reputation of the project initiator. This may also decrease profitability
of the project due to unforeseen extra costs.
Cost of Capital In sum, crowdfunding compared to other forms of financing
exhibits high costs of capital (Agrawal, Catalini, & Goldfarb, 2013). On average,
crowdfunding platforms request about 10 % of the raised capital and frequently
charge additional fees for due diligence of projects or insurances reducing uncer-
tainty and risk for the backers. Further, project initiators need to account costs for
the potential returns such as interests, shared profits, discounts, or other types of
rewards. Conducting crowdfunding campaigns frequently requires high efforts with
respect to preparing a video and other information supporting the campaign, the
management of the campaign itself (e.g. responding to questions of potential
backers), and potentially increased investor relation efforts after the end of the
5 Future Research Directions
In view of the relatively new crowdfunding phenomenon, research lacks a deeper
knowledge on crowdfunding and crowdfunding related topics. Therefore, no or
only limited statements can be made with regard to a wide variety of questions
(Burtch, Benedetto, & Mudambi, 2014), as for, for instance, backers’ motivation to
support a crowdfunding campaign as well as project initiators’ motivation to start a
16 M.M. Gierczak et al.
project, the influence of diverse facets of perceived risk on the funding behaviour
and crowdfunding as an alternative fundraising method for small and medium
enterprises. Crowdfunding research efforts cover inter alia topics on the effective
use of crowdfunding (Schwienbacher & Larralde, 2012), different types of cus-
tomers (Ordanini et al., 2011), the project-specific selection of crowdfunding
platforms (Belleflamme et al., 2014), determinants of project success and failure,
e.g. success factors (Mollick, 2014) or the influence of creativity and hedonic value
(Schulz, Haas, Blohm, & Leimeister, 2015), investment decisions of backers,
e.g. geographic barriers (Agrawal et al., 2010), the prevalence of herding behaviour
(Burtch, 2011) or free riding behaviour (Burtch et al., 2013).
5.1 Backers’ Motivation
In view of this, research still lacks a deeper knowledge about backers’ motivation
for participating in crowdfunding initiatives. In particular, empirically validated
knowledge on what motivates the crowd to invest in certain projects is very limited,
even though the motives to participate in other forms of crowdsourcing initiatives
have been well investigated. For example, Bretschneider, Leimeister, and
Mathiassen (2015) investigated why the crowd develops ideas for firms in
crowdsourcing for innovation communities. However, there are calls to investigate
a crowd’s motivation for crowdfunding separately (Lehner, 2012; Moritz & Block,
2014), since it is expected that backers’ crowdfunding motives differ significantly
from motives for engaging in other forms of crowdsourcing initiatives. According
to this and as presented in Sect. 3.1, preliminary research results discusses a few
possible motives but they are still incomplete and just derived from theory and as
already mentioned not empirically validated. For example, Bretschneider
et al. (2014) discuss herding behaviour as a possible influencing motive for partic-
ipation in crowdfunding. Banerjee (1992) describes herding behaviour as “every-
one doing what everyone else is doing” (p. 798). Backers’ motives already
discussed in literature are not an exhaustive list of motives. Certainly, there are a
lot more motives to be detected and to be derived from theory. Hence,
crowdfunding researchers should focus on insights from motivation research and
carefully analyse and screen the body of knowledge in this field. These efforts
would certainly reveal further possible motivation factors that are relevant and
applicable to the crowdfunding context. Also, there is the need for empirically
validating backers’ motivation factors in crowdfunding.
5.2 Project Initiators’ Motivation
One further possible direction is strongly related to the preceding remarks. It is still
unclear why project initiators are motivated to use crowdfunding. One might be
Crowdfunding: Outlining the New Era of Fundraising 17
tempted to assume that it is of course the need for capital, which motivates project
initiators to engage in crowdfunding. Even if this is right in many or most cases, it is
by no means the only reason. Why project initiators are actually using
crowdfunding might be the most basic question in this field, as it refers to the
fundamental purpose of crowdfunding, which is the starting point and value
proposition for any crowdfunding business model. As shown in the discussion
about the fields of application of crowdfunding, combining the wisdom of the
crowd (Surowiecki, 2004) with an efficient resource allocation mechanism
(Belleflamme et al., 2014; Mollick, 2014; Schwienbacher & Larralde, 2012),
which overcomes information asymmetries (Ahlers et al., 2012; Burtch et al.,
2013) and transaction costs (Agrawal et al., 2010; Bakos, 1998) on an entertaining
platform, reveals manifold opportunities, which address diverse project initiator’s
motives. A differentiated view on project initiators’ motives is necessary in order to
understand them. Therefore, project initiators’ motives should be studied with
respect to the different crowdfunding types, as they might differ a lot. Future
studies should examine project initiators’ motives to use crowdfunding instead of
other forms of funding. This will highlight new insights into crowdfunding and new
facets of this topic. Studying project initiators’ motives provides a better under-
standing of different crowdfunding types, as it focuses on the value for the users not
on how it works. Any business model should take a customer-centred perspective,
rather than a functional perspective. Therefore, functionalities should serve the
purpose of building proper crowdfunding business models, in order to get a better
understanding of the principles and their correlations. Studying project initiators’
motives will have important practical implications as well, as it provides insights in
what actual crowdfunding platforms have to offer in order to satisfy customer
needs. Knowledge about project initiators’ motives will reveal manifold niches
for new crowdfunding platforms as well as new fields of application for
crowdfunding in general.
5.3 Risk in Crowdfunding
A further research direction should focus on what influences a customer’s decision
on whether or not to support a crowdfunding initiative financially. One possible
direction derived from e-commerce and human behaviour literature could be the
empirical investigation of perceived risk in crowdfunding (Gierczak et al., 2014).
For practitioners, risk has been widely considered to be one of the important factors
that influence customers’ buying behaviour. To adequately assess and reduce these
risks, it is crucial for project initiators and intermediaries to know which risk
dimensions are of greatest concern to consumers. Risks mainly occur due to
information asymmetries in transactions, in which the seller usually possesses
more information than the buyer (Pavlou & Gefen, 2004). In general, perceived
risks play a crucial role in all types of consumer behaviour (Mitchell, 1992). The
more risks occur, the less likely a consumer is to purchase (Forsythe & Shi, 2003).
18 M.M. Gierczak et al.
Therefore, according to Mitchell (1999), perceived risks are powerful at explaining
consumers’ behaviour because “consumers are more often motivated to avoid
mistakes than to maximise utility in purchasing” (p. 454). Knowing the risks that
arise in a crowdfunding campaign will help to systematically design and implement
potential risk-reducing elements and strategies into the crowdfunding platforms and
projects in order to attract the crowd to invest and therefore to increase their success
(Mollick, 2014). Doing so can further help to convert some visitors into backers and
thus helps to retain and expand the base of backers.
5.4 Crowdfunding for Small and Medium Enterprises
Small and medium enterprises (SME) seeking financial support from traditional
funding opportunities bank loans and credits might now face more challenges
upon their request than several years ago. Due to the financial market crisis and the
resulting regulations, these requests seem to be significantly more difficult. In this
regard, crowdfunding is seen as a valuable alternative to the traditional funding
opportunities in order to provide SME with the financial resources required (Rossi,
2014). Nevertheless, crowdfunding research still lacks deeper understanding in this
field. Answering questions on how to use crowdfunding for SME, when to use it, for
what purpose as well as specifying general conditions on how platforms should be
designed to ensure success of a crowdfunding campaign will help to strengthen this
funding method for SME, irrespective of the crowdfunding type applied. In the case
of researching on the applicability of crowdfunding for SME, it is important to note
that SME differ a lot, particularly due to their size.
Beside these open research questions, there are further questions that need to be
answered. Among these are issues relating to the following questions: How could
SME and other crowdfunding stakeholders systematically use all potentials of
crowdfunding, not only in terms of fundraising? Which business models are neces-
sary to enable all these potentials? How should marketing, sales or product develop-
ment processes as well as IT-systems be adjusted to ensure the use of crowdfunding?
These above-mentioned potential future directions for research represent only a
minute proportion of potential research directions. Crowdfunding in general still
lacks deeper understanding. Answering these and further questions on
crowdfunding will help to increase its success for all involved parties (Mollick,
2014) and help to ensure the long-term efficiency and sustainability of
crowdfunding in total (Burtch et al., 2013).
6 Conclusion
The aim of this article was to create a better understanding of the continuously
changing field of crowdfunding by discussing different fundamentals and potential
future research directions in order to make the term “crowdfunding” become more
Crowdfunding: Outlining the New Era of Fundraising 19
accessible for backers, project initiators and intermediaries as well as for other
interested parties. Crowdfunding is an umbrella term that basically describes the
funding of a project or venture by many individuals (the crowd) using the Internet.
Through crowdfunding, all kinds of projects that would otherwise eventually not
receive funding get the possibility of raising money. Therefore, crowdfunding is
currently gaining and will gain in the future a lot of attention from practice and
theory. This emerging importance is already evident from current market figures
and the predicted future development. In the near future, the funding volume will
increase significantly, new crowdfunding platforms will be established and others
will be withdrawn from the market. In total, this fragmented crowdfunding market
will consolidate. As we have stated in this article, crowdfunding provides a lot of
potentials. Besides its actual function of fundraising, there are further fields of
interest, inter alia using crowdfunding for the purpose of (pre-)sale marketing and
market research as well as for co-creating with possible future customers. There are
still uncertainties and risks that may appear before, during and after a campaign.
However, there is precious little knowledge about these potential risks and uncer-
tainties. Thus, future research must examine, inter alia, the risks and uncertainties
carefully and research questions on what motivates backers to participate in a
crowdfunding campaign as well as what drives project imitators to call a project
into being. Doing so will help to understand and bring forward this emerging field.
Acknowledgements Our thanks go to Oliver Englisch for his excellent support and valuable
comments. This paper was developed within the project “The Open Innovation Project (IOIT)”,
funded by the European Union INTERREG IVB NWE Programme (Funding code: 166F IOIT).
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Crowdfunding: Outlining the New Era of Fundraising 23
... Crowdfunding increases the availability of capital for projects that are perceived as too risky or not profitable enough to be granted a bank loan, angel investor support, or venture capital funds (Gierczak, Bretschneider, Haas, Blohm, & Leimeister, 2016). For this reason, crowdfunding is considered to be the long tail of the financial services sector. 1 Surprisingly, crowdfunding is, at the same time, a tool that may increase the possibility of obtaining funding from other sources. ...
... If this target is not reached, the allocation of funds depends on the settlement model adopted. There are two options in this respect (Gierczak et al., 2016): • The all-or-nothing (AON) principle -the amount raised is paid to the initiator's account only if the campaign achieves its goal; this principle is based on the assumption that failure to reach the set target will not allow the company to meet its campaign goal; ...
... From the point of view of the organisation, a more advantageous model is the KIA one. The AON option, however, is much more transparent to investors, who know that their funds will only be transferred to the beneficiary once the amount required to implement the campaign goals has been collected (Gierczak et al., 2016). This may be one of the reasons behind the greater effectiveness of the AON model, with a higher proportion of campaigns achieving their financial target (Gierczak et al., 2016;Haas, Blohm, & Leimeister, 2014). ...
The purpose of this chapter is to provide a comprehensive description of crowdfunding and to organise the current knowledge on participant behaviour and marketing management decisions made by campaign initiators. This chapter answers questions such as what is crowdfunding and how does it differ from crowdsourcing? How has crowdfunding evolved and what are the various crowdfunding models and the criteria for their selection by initiators? Additionally, the chapter explores the motivations and decision-making criteria of campaign participants, the different segments of crowdfunding participants, the components of the campaign product, the pricing and distribution strategies, and the most effective marketing communication strategies for achieving campaign objectives. By reviewing existing research, this chapter aims to provide a concise summary of marketing decisions in the area of crowdfunding, making it useful for initiators of campaigns beyond the realm of sports-related activities.
... The important implication of this is Islamic crowdfunding platforms that increasing financial access to non-poor groups, such as nascent and/or transformational entrepreneurs or enterprises, may achieve poverty reduction targets perhaps more effectively than targeting the poor. We also expect that this ideal type includes ICFPs that undertake another substantive action in line with the dominance of the economic responsibility under the Westernmainstream logic, i.e. the adoption of profit-oriented models of CF (Gierczak et al., 2016), i.e. equity-based and lending-based CF models (Troise et al., 2021b), as well as the reward-based model (Lam and Law, 2016) with the exclusion of the donation-based model. These models allow established businesses, start-ups, and individual small projects to be considered and financed, thus enlarging the opportunity to impact different types of initiatives that range from large projects to small-scale, artisanal projects. ...
... Consistent with the Islamic logic focus on charity responsibility, for this type of ICFPs, we expect a prevalence of the donation-based model and relaxed funding mechanisms (e.g. keep-it-all scheme, no minimum pledge amount), which are particularly suitable for charity projects (Gierczak et al., 2016). These relaxed funding mechanisms may encourage small contributions to be made on these platforms and thus effectively contribute to helping the bottom of the pyramid of socio-economic groups (Casselman et al., 2015). ...
... Thus, we expect that platforms of this ideal type pursue SD by means of selecting and promoting business projects as well as charity projects. Consistent with this strategy of hybridizing, we expect that a platform of this ideal type run both profit-oriented and non-profit-oriented models of CF and allow relaxed and unrelaxed funding mechanisms (Gierczak et al., 2016). This opens the opportunity for funds to several capital-seekers that include subsistence and transformational entrepreneurs as well as needy people with the SD effects related to these CF models and schemes as explained in the previous two ideal types but with a higher SD impact due to the wider base of capital-seekers. ...
Purpose This paper aims at explaining variances in the contribution of Islamic crowdfunding platforms (ICFPs) to sustainable development (SD), by adopting an institutional logic perspective (ILP). ICFPs represent a dual institutional overlap between two logics (the Western-mainstream and the Islamic logic) which have an impact on corporate social responsibility (CSR) interpretations, practices, and decisions and whose conflicts are mitigated by choosing different resolution strategies. The authors aim at showing that this choice affects SD differently. Design/methodology/approach The authors develop a conceptual typology through the following steps: (1) choice of variables and identification of corresponding variable domains, through literature review. Variables chosen are the elemental CSR dimensions related to various social and environmental corporate responsibilities to whom diverse meaning and emphasis are given under the Western-mainstream and Islamic logics. (2) Identification of three distinct ideal types of ICFPs, building on different resolution strategies to mitigate conflicts between logics; (3) development, for each ideal type, of a set of implications related to SD; (4) implementation of a first test aiming at assigning real cases to each ideal type. Findings The authors identify Western-mimicking (platforms adopting as resolution strategy decoupling or compartmentalizing strategies), Islamic-driven (platforms focusing on one prevailing logic) and Syncretism-inspired (platforms adopting hybridizing practices) ideal-types. Originality/value It is the first paper suggesting ILP to explain variances in crowdfunding platforms' role in addressing SD. It focuses on a specific type of CF platforms till now neglected.
... Crowdfunding has partially filled the capital gap faced by small and microsized enterprises, particularly start-ups, which find it challenging to have their projects funded by traditional sources such as bank loans, venture capitalists, or their own savings (Gierczak et al., 2016). By financing risky technological projects as well as ambitious cultural and social ventures, crowdfunding has created a market that is estimated to reach USD 1.3 billion by 2028 (Bloomberg, 2022). ...
... In this way, crowdfunding produces the 'long tail' of financial services (Haas, Blohm, & Leimeister, 2014), linking the ideas of crowdsourcing and microfinancing together (Mollick, 2014). Consequently, it increases the availability of capital for projects that are often perceived as too risky or not profitable to receive not only a bank loan but also support from business angels or venture capital (Gierczak et al., 2016). ...
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PURPOSE: As the issue of the motivations of crowdinvestors is still heavily debated, empirical research has come to focus on specific industries and the heterogeneity of motivations within specific crowdfunding models. This study combines these two perspectives and considers the research question of the heterogeneous motivations of football club crowdinvestors. The aim of the study is to segment the football club crowdinvestors according to investment motivations. METHODOLOGY: In this study, the survey research method was used for a sample (n = 793) of crowdinvestors from the Wisla Krakow football club, and a two-step motivation-based segmentation approach was applied. The convenient sampling method was used as the club distributed the surveys electronically among all its crowdinvestors in July 2021. A cluster analysis, including Ward’s method with Euclidian distance and the non-parametric k-means method, was applied to segment the market. Differences between segments were assessed with chi-square tests for qualitative variables and Kruskal-Wallis H tests with Dunn’s post hoc tests for quantitative variables. A discriminant analysis successfully validated the segmenting procedure. FINDINGS: The crowdinvestors of football clubs were divided into three market segments: benefit-oriented (50.7%), club-oriented (45.3%), and goal-oriented (4.0%). This clustering solution was influenced by all of the previously identified motivations: fan identification, supporting a campaign’s cause, status of football club owner, rewards, and return on investment. The segments were also differentiated according to consumption-related behaviors (media consumption, word-of-mouth marketing, merchandise purchases, match attendance, and social media engagement) and socio-demographic profiles (age, marital status, income, and place of residence). With the exception of the goal-oriented niche, crowdinvestors of football clubs are fans who are highly identified with the club and focused on supporting the cause of the campaign. However, some of them (“benefit-oriented”) are more sensitive than others to the return on investment, rewards, and status that comes along with club ownership (“club-oriented”). Benefit-oriented crowdinvestors consume the club’s products to the greatest extent, while goal-oriented crowdinvestors are on the opposite side of the spectrum. IMPLICATIONS: Based on self-determination theory, no cluster with a predominance of extrinsic motivations was found. These results are in opposition to most crowdfunding studies, but are in line with sport management literature. Importantly, evidence was found showing that groups that are homogenous in terms of crowdinvestment activity can still be heterogeneous in terms of crowdinvestment motivations. This insight shows that crowdinvestment motivations should be considered in more detail than they have been in the past. The assumptions of the multi-needs-meeting phenomenon of crowdinvesting in football clubs were also confirmed. These outcomes provide sports managers with information about market segments of crowdinvestors that they can use to communicate their crowdfunding campaigns more effectively. ORIGINALITY AND VALUE: This study is the first to present the research-tested heterogeneity of investment motivations among football club crowdinvestors. It shows the instability of research results that focus on entire crowdfunding models and ignore the industry-related specificities and internal diversity of crowdinvestors. Moreover, it extends the area of research on fan investors in the football industry, which has, until this point, focused on investment motivations without taking their internal heterogeneity into account.
... The latter (i.e. Make a Champ, Sport Funder, Pleadge Sport) are the exemplification of what is referred to as hyper-specialisation of the internet economy, which, in the context of crowdfunding, has resulted in the emergence of platforms oriented towards specific niches, not only industry-specific but also focusing on projects with a specific nature (Gierczak, Bretschneider, Haas, Blohm, & Leimeister, 2016;Malone, Laubacher, & Johns, 2011). On the most popular sports crowdfunding platform, Make a Champ (2022), alone, nearly 44,000 campaigns have been implemented so far (as of the end of 2022). ...
This chapter presents a synthesis of the results of the existing research on crowdfunding in the context of sports clubs, with reference to the theoretical and conceptual framework presented in the earlier part of the book. The primary objectives of this chapter are (i) to characterize the specific nature of crowdfunding campaigns in the context of sports clubs and (ii) to develop assumptions for a marketing strategy model for sports club crowdfunding campaigns under the equity crowdfunding model. Specifically, the chapter provides information on the typology of sports crowdfunding, the extent to which sports clubs utilize equity crowdfunding, the characteristics of selected crowdfunding campaigns conducted by sports clubs, the motivations and profiles of the segments of crowdinvestors in sports clubs, highlighting their unique aspects, and the value proposition offered to crowdinvestors in sports clubs, along with the manner and limits of their delivery.
... From the digital-savvy person, crowdfunding is alluring. According to Baeck and Collins (2013); Bernardino et al (2020); Gierczak et al (2016), the creator uses the social media platform and other online web-based application, for instance, Facebook, Instagram, WhatsApp, TikTok and many more to convey accurate information and to magnetize the supporters to donate. Additionally, to communicate news regarding the campaign's updates and rewards entitlement. ...
... Серед іноземних авторів слід виділити праці С. Дреснера [1], Дж. А. Хемера [2], Х.Маркс [3], М. Гєрчака, У. Бретшнейдера, Ф. Хааса, І. Блоха, Я. Леймейстера [4], П. Белефлама, T. Ламберта, A. Швенбакера [5], Орданіні А., Міцелі Л., Пізетті М. та Парасурамана А. [6]. ...
... According to the theory of enterprise financing, the main sources of funding for new enterprises at their early stages of development are the entrepreneurs' own funds or loans received from their families and friends, i.e. the so-called 3F (founders, family, friends) funding (Berger & Udell, 1998;Richard et al., 2014). Also, what is important, articles published over the recent years point to crowdfunding as another major source of financing for new business entities (Gierczak et al., 2015;Brown et al., 2018;Lukkarinen et al., 2016;Richard et al., 2014;Flebbe, 2016). However, reports on funding sources of Polish newly-founded ventures have concluded that the use of crowdfunding in Poland is still limited. ...
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Theoretical background: This article addresses issues related to the possibilities of using crowdfunding by newly-founded enterprises in Poland. Previous research results have shown that even small amounts obtained at a vital moment may be of key importance for an enterprise’s development. Crowdfunding is a form of financing where decisions on providing the funds are made voluntarily, predominantly by individuals, and there are no traditional intermediaries engaged in the funding process or the project evaluation. Therefore, what matters in fundraising is the business concept itself, which the enterprise wants to implement. Purpose of the article: The main objective of this article is to find out whether crowdfunding is an adequate form of funding for opportunity- or necessity-based enterprises newly founded in Poland. Hence, this article starts with distinguishing between opportunity-based enterprises and necessity-based enterprises, using different criteria. Furthermore, an attempt is made to modify the criteria for classification of newly-founded business entities as opportunity- and necessity-based enterprises, to reflect the specific conditions prevailing in Poland. Research methods: The research study involved a representative sample of newly-founded enterprises based in the West Pomerania Voivodeship in Poland. Based on public statistical records, a group of newly-founded entities was identified, a research sample was selected, and a survey was carried out using a questionnaire as a tool. The CATI method was used in the research, which made it possible to reach entrepreneurs rather than random employees to answer the questions. In the survey the main characteristic were studied like: the financing structure and innovativeness of the newly-founded enterprises, but also the knowledge about crowdfunding and the assessment of this form of financing. Main findings: The completed research study has shown that although crowdfunding is seen as an adequate form of funding for newly-founded enterprises, especially opportunity-based ones, the potential for using this form of funding by the surveyed enterprises in Poland is still low, which may result from the enterprises’ low awareness of possibilities offered by crowdfunding, as well as low innovativeness.
... Academics and policymakers have enthusiastically embraced crowdfunding as an alternative source of external finance for entrepreneurial ventures (Gierczak et al., 2016). Drawing upon ideas from microfinancing (Armendáriz de Aghion and Morduch, 2000) and crowdsourcing (Afuah and Tucci, 2012), crowdfunding is the effort of collecting smaller amounts of money from a larger crowd via the Internet (Mollick, 2014). ...
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Enthusiasm for crowdfunding’s ability to fill gaps in the provision of entrepreneurial finance continues among academics, policymakers and practitioners. In this, increasing attention has been paid to the geography of crowdfunding. This work has provided important evidence on various spatial influences on the location of platforms and campaigns and on their eventual success. In this paper, we take a rare look at the geography of the supply of crowdfunds. Specifically, our concern is with equity crowdfunding. Drawing on a hand collected data set, combining data on investments and on investors’ locations, we explore spatial influences on the extent of crowdfunding investment beyond commonly explored issues of distance.
... Fundraising through the donation-based crowdfunding has been the talk of the town recently and it has created a new era of fundraising (Gierczak et al., 2016). Chen et al. (2019) compared the traditional charities with donation-based crowdfunding and they concluded that raising funds through the donation-based crowdfunding has several comparative benefits (Yin et al., 2022). ...
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Purpose This study aims to explore the antecedents of donors’ attitudes toward fundraising campaigns to fight COVID-19 in the United Arab Emirates (UAE) during the pandemic crisis. This manuscript identified how moderating effects of ethical dimensions can strengthen the relationship between trust in charity and charity projects with their attitude to raise funds to mitigate pandemic repercussions. Design/methodology/approach This study follows a quantitative approach by administering survey instruments to collect the data from the sample of respondents. A total of 391 responses were obtained adopting snowball sampling and analyzed through structural equation modeling (SEM) to derive meaningful results for path analysis. Findings The findings of this study indicate that certain insights need to be considered to trigger the donors’ attitude toward raising or participating in charity-oriented campaigns, especially during pandemic situations. For instance, organizing more transformable processes in charity projects and establishing more trust factors among donors is highly essential in charity activities. Similarly, promoting ethical dimensions of the donors toward supporting the vulnerable more effectively and encouraging them to participate or organize philanthropic activities certainly benefit and support this noble cause. Practical implications This study will help the government and nonprofit organizations in devising their campaigns for raising funds. The findings of this study suggest that ethics is an important consideration and driver for donors in philanthropy-serving organizations and individuals. Originality/value This research contributes to the literature on donation and philanthropic studies focusing on fundraising campaigns attitudes during COVID-19. This study contributes influential factors and attitudes of individuals and organizations toward charity and philanthropic service.
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Die Wirtschaftsinformatik steht heute am Wendepunkt. Ist die Planung, Entwicklung und der Betrieb von Informations- und Telekommunikationssystemen (ITK) bisher eine Managementaufgabe einiger „Eliten“ in Verwaltung und Wirtschaft gewesen, so führt die zunehmende Durchdringung aller Lebensbereiche mit ITK zu einer Veränderung der gesamten ITK-Landschaft, die den Menschen in der digitalen Welt – den digitalen Nutzer – in den Mittelpunkt der zukünftigen Betrachtung stellt. Aus dem Blickwinkel der Wirtschaftsinformatik stellt sich diese Entwicklung nicht nur als vorübergehende Modeerscheinung dar, sondern hat als komplexes soziotechnisches Phänomen weitreichende Bedeutung. Die sich ergebenden Herausforderungen sind vielfältig und betreffen die gesamte Wirtschaftsinformatik sowohl in Forschung als auch in Praxis. Prozessmodelle von Unternehmen sind vollkommen neu aus der Nutzungsperspektive einzelner Individuen zu betrachten und zu entwerfen. Die Individualisierung von Anwendungssystemen bei gleichzeitiger Desintegration von Funktionen und die Unterstützung völlig neuer Bedienkonzepte werfen die Frage nach neuen Entwicklungs- und Innovationsmethoden wie auch Architekturkonzepten auf. Der Umgang mit Datenmassen in einer weiter rasant zunehmenden Digitalisierung von Lebenswelten und Unternehmungen stellt die Wissenschaft und Praxis vor Herausforderungen. Um diese Herausforderungen zu lösen, wird ein neues Forschungsfeld „User, Use & Utility“ skizziert, welches den digitalen Nutzer und dessen Nutzungsverhalten in der digitalen Welt als primäres Untersuchungsobjekt beschreibt. Ziel ist die zukünftige systematische Ableitung von Anforderungen, die digitale Nutzer an Informationssysteme stellen. Für diese Aufgabenstellung ist die Kombination und Integration diverser wissenschaftlicher Disziplinen wie Design, Ingenieurswesen, Informatik, Psychologie, Soziologie und anderen notwendig. Die Wirtschaftsinformatik hat die Chance, eine Schlüsselrolle zu spielen.
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Crowdfunding was used for the development and production of an information literacy game, SEEK!, in 2012. The game aims to build skills around creating a search strategy and is deliberately generic and adaptable. This article outlines the reasons for using such a game for the teaching of information skills, the process of gaining funding via the crowdfunding platform Indiegogo and some future developments that build on the initial game creation and use.
Virtual idea communities (VICs) such as Dell's 'Ideastorm' are very popular in practice. In VICs, customers of firms can submit ideas to support product innovation. This customer-based ideation is not new. Customers have been brought together in lead-user-workshops or focus-groups since the 1980s to support product innovation. However, VICs represents a new form of IT-mediated ideation with customers. While extant research has provided insights into customers' motives for participating in traditional ideation, we know little about the motivations that drive customer participation in this new form of IT-enabled ideation. Based on a survey of customer motivations for participation, we found evidence for motives that arise directly due to the VIC's IT-ability to support visualisation of customer ideas, to give feedback on ideas, and to support customers' social interactions. As a result, VICs are perceived as a way to demonstrate personal capabilities, for getting recognition, and for facilitating social interaction.
An extensive literature in economics and finance has documented home bias, the tendency that transactions are more likely to occur between parties in the same geographical area rather than outside. Using data from a large online crowdfunding marketplace and employing a quasi-experimental design, we find evidence that home bias still exists in this virtual marketplace for financial products. Furthermore, through a series of empirical tests, we show that rationality-based explanations cannot fully explain such behavior and that behavioral reasons at least partially drive this remarkable phenomenon. As crowdfunding becomes an alternative and increasingly appealing channel for financing, a better understanding of home bias in this new context provides important managerial, practical, and policy implications.
The success of the Linux operating system has demonstrated the viability of open-source software, an alternative form of software development that challenges traditional assumptions about software markets. Understanding why developers participate in open-source projects is crucial for assessing the impact of open-source software. Their motivations fall into two broad categories: internal factors (e.g., intrinsic motivation, altruism) and external rewards (e.g., expected future returns, personal needs). The results of a survey administered to open-source programmers are summarized.
Rewards-based crowdfunding campaigns are commonly offered in one of two models: “Keep-it-All” (KIA) where the entrepreneurial firm sets a fundraising goal and keeps the entire amount raised regardless of whether or not they meet their goal, and “All-or-Nothing” (AON) where the entrepreneurial firm sets a fundraising goal and keeps nothing unless the goal is achieved. We provide large sample evidence consistent with the view that the usage of AON is a credible signal to the crowd that the entrepreneur commits not to undertake the project if not enough is raised. This signal reduces the risk to the crowd, thereby enabling the AON entrepreneurial firms to set higher goals, raise more money, and be more likely to reach their stated goals. In contrast, KIA projects tend to be less successful, since the crowd bears the risk that an entrepreneurial firm undertakes a project that is underfunded and hence more likely to fail after the campaign. Entrepreneurs use the KIA model for scalable projects; that is, projects that are still feasible with partial funding. Further, we provide evidence that the crowd is much more sensitive to information provided by AON projects. We show that these findings are robust to a number of robustness checks, including but not limited to use of instrumental variables and propensity score matching.
German Abstract: Crowdfunding gewinnt in der Gründungs- und Innovationsfinanzierung an Bedeutung. Ein Überblick der wissenschaftlichen Arbeiten zu Crowdfunding fehlt allerdings. Dieser Artikel gibt einen Literaturüberblick und leitet relevante Forschungsfragen für zukünftige Untersuchungen ab. Zunächst werden die Begriffe Crowdfunding und Crowdinvesting definiert und voneinander abgegrenzt. Die verschiedenen Ausprägungsformen und der idealtypische Prozess des Crowdfundings werden vorgestellt. Im Anschluss wird die vorhandene wissenschaftliche Literatur entsprechend den Akteuren im Crowdfunding (Kapitalnehmer, Kapitalgeber und Intermediäre) zugeordnet, strukturiert und in ihren wichtigsten Ergebnissen beschrieben.English Abstract: Crowdfunding gained importance over the last years. However, an overview of the scientific literature on this topic does not exist. This paper provides an overview of the crowdfunding literature and derives important research questions for further research. After a definition of the terms ‘crowdfunding’ and ‘crowdinvesting’ and the underlying process we summarize the relevant scientific literature on crowdfunding classified by the main actors (capital seekers, capital providers, and intermediaries).
While current research treats all crowdfunders on the same platform as a homogeneous group, we argue that such an assumption may limit our understanding of the complexities of the crowdfunder community. In this paper, we begin to unpack the complexities of the crowdfunder community by identifying different archetypes of crowdfunders funding technology projects on Kickstarter, we identified four distinct types of crowdfunders: Active Backers, Trend Followers, the Altruistic, and the Crowd. Our results show that crowdfunders on the same platform are highly heterogeneous, with different motivations that are reflected in their strategies and behaviors. We further hypothesized and tested how the strategies and motivations of different crowdfunder archetypes further influence their choices of when and which projects to fund. In so doing, we not only reconcile conflicting results from the literature, but also synthesize differing theoretical perspectives that have been applied to understand the crowdfunding phenomenon.