Abstract

http://ssrn.com/abstract=2447567
 


 



Crowdfunding Models: Keep-it-All vs. All-or-Nothing


Douglas J. Cumming


York University - Schulich School of Business

Gaël Leboeuf


Univ. Lille Nord de France - Skema Business School

Armin Schwienbacher


Univ. Lille Nord de France - SKEMA Business School

June 2, 2014


Abstract:     
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.

Number of Pages in PDF File: 33

Keywords: Crowdfunding, Entrepreneurial Finance, Internet, Signaling, Indiegogo

JEL Classification: G21, G24, G32, L26

working papers series


Download This Paper

Date posted: June 11, 2014  

Suggested Citation

Cumming, Douglas J. and Leboeuf, Gaël and Schwienbacher, Armin, Crowdfunding Models: Keep-it-All vs. All-or-Nothing (June 2, 2014). Available at SSRN: http://ssrn.com/abstract=2447567 or http://dx.doi.org/10.2139/ssrn.2447567

Contact Information

Douglas J. Cumming
York University - Schulich School of Business ( email )
4700 Keele Street
Toronto, Ontario M3J 1P3
Canada
HOME PAGE: http://www.venturecapitalprivateequitycontracting.com/
Gaël Leboeuf
Univ. Lille Nord de France - Skema Business School ( email )
Lille
France
HOME PAGE: http://www.ecccs.eu/
Armin Schwienbacher (Contact Author)
Univ. Lille Nord de France - SKEMA Business School ( email )
Lille
France
Feedback to SSRN


Paper statistics
Abstract Views: 871
Downloads: 229
Download Rank: 76,674
People who downloaded this paper also downloaded:
1. Same Rules, Different Enforcement: Market Abuse in Europe
By Douglas Cumming, Alexander Peter Groh, ...

Paper comments
No comments have been made on this paper

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo8 in 0.266 seconds