Crowdfunding Models: Keep-It-All vs. All-or-Nothing
Douglas J. Cumming
York University - Schulich School of Business
Univ. Lille Nord de France - Skema Business School
Univ. Lille - SKEMA Business School
September 27, 2014
Paris December 2014 Finance Meeting EUROFIDAI - AFFI Paper
Rewards-based crowdfunding campaigns are commonly offered in one of two models. The “Keep-it-All” (KIA) model involves the entrepreneurial firm setting a fundraising goal and keeping the entire amount raised regardless of whether or not they meet their goal, thereby giving a risk to the crowd that an underfunded project goes ahead. The “All-or-Nothing” (AON) model involves the entrepreneurial firm setting a fundraising goal and keeping nothing unless the goal is achieved, thereby shifting the risk to the entrepreneur. We show that small scalable projects are more likely to be funded through the KIA scheme, while large non-scalable projects are more likely to be funded through the AON scheme. Entrepreneurs that deviate from these strategies tend to be less successful in meeting their fundraising goals.
Number of Pages in PDF File: 37
Keywords: Crowdfunding, Entrepreneurial Finance, Internet, Signaling, Indiegogo
JEL Classification: G21, G24, G32, L26working papers series
Date posted: June 11, 2014 ; Last revised: November 20, 2014
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