authors NUNO MOUTINHO / PEDRO LEITE / 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 crowdfunding what 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

1. 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 ,75 years total of initiatives crowdfunding

Quantitative analysis crowdfunding Financing Rate= Capital pledged goal ≥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 $ ,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 CategoryNumber of projects%Collected% Art17499% $ ,006% Comics4222% $ ,843% Dance4282% $ ,001% Design5063% $ ,0012% Fashion2601% $ ,001% Film&Video516428% $ ,0032% Food4302% $ ,003% Games4052% $ ,004% Music557830% $ ,1222% Photography5843% $ ,002% Publishing12497% $ ,005% Technology2311% $ ,005% Theater14248% $ ,004% 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 VariablesCoefficientstSig. (Constant)114,42724,084,000 Backers,28936,430,000 Project category: Design115,5389,798,000 Comments-,092-6,490,000 Project category: Games45,9103,562,000 Entrepreneur backed1,0904,016,000 Project category: Fims&Video-14,637-3,288,001 Levels of reward-1,677-3,629,000 Project category: Technology52,0262,857,004 Updates,7472,494,013 Project category: Art13,7702,069,039 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 failure crowdfunding

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

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 / 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