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SHARING INFORMATION IN A VIRTUAL COMMUNITY OF CROWDFUNDING : the case of Kickstarter University of Porto (UP) CEF.UP, CETAC.MEDIA authors NUNO MOUTINHO / PEDRO LEITE e-mail [email protected] / [email protected] PORTO, NOVEMBER 8, 2013 Roadmap Definition Literature Review Analysis Quantitative Qualitative Conclusions crowdfunding Definition what does crowdfunding mean? crowdfunding Definition “ 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 CHARACTERIZATION OF THE CROWDFUNDING PROCESS Definition BUSINESS IDEA IS CONCEIVED PLATFORM IS SELECTED PROJECT IS DEFINED INITIATIVE IS APPROVED AND GOES PUBLIC CONTRIBUTIONS ARE MADE FROM THE CROWD 1. Entrepreneur conceives a business idea and decides to implement it. 2. Selects crowdfunding as fundraising method. Then, he chooses the platform according to the nature and the goals of the initiative. 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. 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. 5. During this timeline, project stands in the front of the world, and contributions are accepted for each level of reward. END OF DEADLINE 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. INITIATIVE IS IMPLEMENTED 7. If successfull, initiative is implemented according with the description. REWARDS ARE DISTRIBUTED 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 2012 2,75 years total of 18.430 initiatives crowdfunding Quantitative analysis (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 Financing Rate = Capital pledged ≥1 goal Stability tests Ordinary Least Squares (OLS) Stepwise Method crowdfunding Quantitative results $128.333.380,96 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 Number of campaigns successfully financed per month 1400 1200 1000 800 600 400 200 0 crowdfunding Quantitative results Money collected per month 12,000,000 10,000,000 8,000,000 6,000,000 4,000,000 2,000,000 0 crowdfunding Quantitative results Category Number of projects % Collected Art 1749 9% $ 7.551.031,00 6% Comics 422 2% $ 3.576.117,84 3% Dance 428 2% $ 1.418.837,00 1% Design 506 3% $ 14.807.199,00 12% Fashion 260 1% $ 1.549.196,00 1% Film&Video 5164 28% $ 41.304.377,00 32% Food 430 2% $ 3.852.034,00 3% Games 405 2% $ 4.655.087,00 4% Music 5578 30% $ 28.405.638,12 22% Photography 584 3% $ 2.798.028,00 2% Publishing 1249 7% $ 6.349.992,00 5% Technology 231 1% $ 6.491.232,00 5% Theater 1424 8% $ 5.574.612,00 4% crowdfunding % Quantitative results average return of the project crowdfunding Quantitative results 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. crowdfunding Quantitative results Variables Coefficients t Sig. (Constant) 114,427 24,084 ,000 Backers ,289 36,430 ,000 Project category: Design 115,538 9,798 ,000 Comments -,092 -6,490 ,000 Project category: Games 45,910 3,562 ,000 Entrepreneur backed 1,090 4,016 ,000 Project category: Fims&Video -14,637 -3,288 ,001 Levels of reward -1,677 -3,629 ,000 Project category: Technology 52,026 2,857 ,004 Updates ,747 2,494 ,013 Project category: Art 13,770 2,069 ,039 crowdfunding Quantitative results 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 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 RPG Board Game Higher financing rate in Games category crowdfunding Tephra: the Steampunk RPG 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 Printrbot: Your First 3D Printer 3D Printer Higher financing rate in Technology category crowdfunding 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 Dock for the iPhone phone The Highest financing rate in our sample crowdfunding Elevation Dock: The Best Dock For iPhone 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 crowdfunding 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 make good use of video and description tools. 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 SHARING INFORMATION IN A VIRTUAL COMMUNITY OF CROWDFUNDING : the case of Kickstarter University of Porto (UP) CEF.UP, CETAC.MEDIA authors NUNO MOUTINHO / PEDRO LEITE e-mail [email protected] / [email protected] PORTO, NOVEMBER 8, 2013