41 Pages Posted: 11 Jun 2014 Last revised: 13 Jan 2017
Date Written: May 31, 2015
Reward-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 allocating the risk to the crowd when 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. Overall, KIA campaigns are less successful in meeting their fundraising goals, consistent with a risk-return tradeoff for entrepreneurs, where opting for the KIA scheme represents less risk and less return for the entrepreneur.
Keywords: Crowdfunding, Internet, Signaling
JEL Classification: G21, G24, G32, L26
Suggested Citation: Suggested Citation
Cumming, Douglas J. and Leboeuf, Gaël and Schwienbacher, Armin, Crowdfunding Models: Keep-It-All vs. All-Or-Nothing (May 31, 2015). Available at SSRN: https://ssrn.com/abstract=2447567 or http://dx.doi.org/10.2139/ssrn.2447567