Entrepreneurial Crowdfunding without Private Claims
41 Pages Posted: 6 Oct 2015 Last revised: 23 Aug 2017
Date Written: August 23, 2017
Today's crowdfunding raises funds for tiny, private entrepreneurial ventures without granting funders private claims to a project's future value. Rather than “investments,” these are “contributions.” This paper argues that for such crowdfunding neither producer nor consumer surplus – i.e., project quality, in traditional terms – will play a role in determining funding. Private gifts to funders create typically weak incentives to contribute. Specific kinds of non-pecuniary motivations provide main incentives to contribute. We confirm predictions in time-series observational data set on gross contributions, communications and announcements, new version releases and policy changes, and product use from a representative project.
Keywords: Online platforms, crowdfunding, entrepreneurial finance, new ventures, public goods
JEL Classification: G2, G02, H41
Suggested Citation: Suggested Citation