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Conclusions: why do people fund projects via crowdfunding?

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This is a social research about the key drivers to understand why people fund projects via crowdfunding. What do the backers get back in return? What qualities do the most attractive projects have to appeal to the backers? Which are the qualities of promotors that increase the backer´s interest? What are the aspects that make the backers reject the project? Do backers have doubts about crowdfunding? 
This research was made by exploring opinions in more than 3.400 backers who have funded projects in “Lanzanos” the Spanish based crowdfunding platform.

Publicado en: Empresariales, Tecnología
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Conclusions: why do people fund projects via crowdfunding?

  1. 1. @luismi_barral @pepabarral Pepa Barral Tel: +34 619 256 655 @pepabarral Luis Miguel Barral Tel: +34 616 104 246 @luismi_barral Created for
  2. 2. @luismi_barral @pepabarral Quiero Salvar el Mundo Haciendo Marketing. MUWOM Target Empírica ENAE Business School Northern Illinios University
  3. 3. @luismi_barral @pepabarral To Bruno Teixidor (@bruteix), Carola Rodríguez (@Carola_Rodrgz) and Nicolás Alcalá (@cosmonauta) for inviting us to board the spaceship. To Pedro Serrahima (@serrahim) for his ethical courage. You are Titans. Photo: Celularis Photo: Riot Cinema
  4. 4. @luismi_barral @pepabarral Sample. The Research Universe: This research is based on responses by users registered with the crowdfunding platform Lanzanos (Spain): 130,000 people. Methodology: The research has been developed in two phases: Qualitative phase. September 2013. Via CAWI questionnaire semi structured, average duration 35 minutes, completed by 280 users. Link to Spanish questionnaire: Quantitative phase: Starting from the previous qualitative analysis, a survey has been made in March 2014, with a closed question CAWI questionnaire (duration: 12 minutes), with the participation of 4,070 Lanzanos users, of which 3,153 (77.5%) have contributed as backers in some: Sampling used in the survey: The invitation to participate in the survey was sent to 118,000 users selected by simple random sampling. The opinion of a sample of 3,153 backers has been taken. Maximum sampling error of + / - 1.75%. Confidence level of 95.5% and assuming maximum uncertainty of a random event (p = 0.5 = 1-p).
  5. 5. @luismi_barral @pepabarral Total invitations (118.053) Total open mail (35.335) Opened mail Un-opened mail Bounce- backs Completed Abandon questionnaire Don’t participate Do not open link to questionnaire Hello, this is Gregorio López Triviño and I´m talking to you on behalf of all Lanzano’s Team, one of the first crowdfunding platforms that started in Europe. I´m writing to you to ask for your participation in a survey about crowdfunding, can you help us? [No, I prefer not to help]. In collaboration with Netquest Company we have prepared a questionnaire to be answered in absolute anonymity (this is the reason why we do not greet you personally in this message).  It’s a different survey, with questions that could surprise you because they’re not the usual ones. Some of them will make you think about them, that´s why I suggest you find a quiet moment during the day to answer. Your sincerity will be a precious gift for us. [Click here to complete the questionnaire] If you do not wish to participate click on the other link, and we won’t send you any reminders. Best regards and thanks for your honesty Sample.
  6. 6. @luismi_barral @pepabarral Total interviews (4.700) Not familiar with crowdfunding (630) Familar but haven’t backed any projects yet. (917) Have backed projects at some point in the last three years. (3.153) End Brief questionnaire In-depth questionnaire Sample.
  7. 7. @luismi_barral @pepabarral Conclusions.
  8. 8. @luismi_barral @pepabarral Because they get something back. An exchange. This research has allowed us to explore that exchange by listening to the opinion of over 3,400 people with experience in funding projects via crowdfunding. We have been given 770 hours of backers’ time. After listening to them, we have found that crowdfunding “makes them feel good”, and these are the reasons why: 1. “I contribute to create what I like.” This is the outstanding reason amongst those who participated in this research. When we speak of “contributing to create” we enter the field of co-development, where the backer participates in the creation of the conditions to make the project happen. This initial benefit influences everything else. 2. “I support the creators directly. Without intermediaries.” There are two reasons for the backer to support directly: On one side it generates a feeling of closeness to the creators; on the other, a sense of efficiency to optimise resources as the economic support gets to its destiny practically in its totality, without paying tolls to intermediaries that don’t add value. Conclusions. Why do people fund projects via crowdfunding?
  9. 9. @luismi_barral @pepabarral 3. “I contribute to producing innovative things” By innovative we understand something that’s “new” or “original”. Crowdfunding backers indicate that it is gratifying to feel like a channel through which new things can happen. It’s a way to be part of a renovation process. 4. “I’m supporting the entrepreneurial impulse” This is supporting an entrepreneurial force led by small businesses, which generate an alternative financial growth to those that have led to the current economic and institutional collapse/crisis. These four reasons are at the core of the exchange. To these we can add a couple more that are less focal, but still act in harmony with those already mentioned. ➪ A reason of “epic” nature: “I feel that we are not as dependent on the traditional powers” ➪ And a “romantic” one: “I help to make dreams come true” If we observe the ensemble formed by the four principal reasons and its two associated echoes, we can say that crowdfunding for the backer is a story of Change towards something New, Valuable and Easy to experience. Understanding this meaning doesn’t need complex intellectual thinking, nor does it require a special heroism from the backers. Crowdfunding doesn’t generate a feeling of going “against the mainstream”, rather it allows change through an experience that is easy to engage with. Conclusions.
  10. 10. @luismi_barral @pepabarral I contribute to make what I like. No intermediaries. I back the creators directly. % Multiple answer I help create innovative things. I feel like I’m supporting entrepreneurship. I help make dreams come true. I feel we are not so dependent on traditional powers. I change reality with a small gesture. I receive the creators’ gratitude. The feeling of trusting others. I like to feel like I’m going against the main-stream. None/I don’t know/No answer Question Some people say that when they back a crowdfunding project, they feel good. Here we have summed up some of the reasons they gave us. Please tick 4 or 5 reasons you identify with. Base: total backers, 3.153. Items showed in random order. Conclusions.
  11. 11. @luismi_barral @pepabarral Conclusions. Yes. Research shows three types of backers, we call them Enthusiasts (41.8% of interviewees), Moderates (46.5%) and Cold (11,7%). There is a strong correlation between these three types of backers and their approach to participating in project funding. So the more frequent the participation is, the bigger the proportion of enthusiasts and the less of moderates and cold. Are there different types of backers? Total Backers 1 2 or 3 6 +4 or 5 Quantity of funded projects % Enthusiasts % Cold % Moderates
  12. 12. @luismi_barral @pepabarral What factors explain the differences between enthusiast, moderate and cold backers? The research doesn’t observe decisive differences linked to a socio-demographic profile. There are not major differences determined by sex, gender or age. Neither by level of education, nor employment status. Not even by personal economic circumstances. The most influential factor is the attitude from which the backer approaches and engages in crowdfunding. There are two predominant attitudes: ➪ ChangeMaker, which is present in people who see crowdfunding as “a way for citizens to make the world a better place”. ➪ Pragmatic attitude, which conceives crowdfunding as a phenomenon “that it is useful to make some projects happen with people’s support, but little else”. Both attitudes are present in the three types of backers but in different doses. In the enthusiast group, the predominant attitude is ChangeMaker instead of Pragmatic. It is the opposite in the cold group and in the moderate, the proportion is shared at 50%. Conclusions.
  13. 13. @luismi_barral @pepabarral % ChangeMaker Attitude: it’s a way for citizens to make the world a better place. % Pragmatic Attitude: it’s useful to make some projects happen with people’s support, but little else. % It’s a utopia. In reality is not very useful. % I don’t know what to say. Total Backers (3.153) Enthusiasts (1.319) Moderates (1.466) Types of backers Cold (368) Conclusions. Backers’ attitude towards crowdfunding
  14. 14. @luismi_barral @pepabarral The conclusion is that in the enthusiast backer group we find a more frequent participation, due to there is a higher dose of ChangeMaker attitude rather than Pragmatic. The presence of this ChangeMaker attitude, which sees crowdfunding as a “tool to make the world a better place” explains that enthusiast backers find it easier to engage with projects that resonate with their motivations. Total Backers (3.153) Enthusiasts (1.319) Moderates (1.466) Types of backers Cold (368) % Four or more % Two or three % One % Don’t know, no answer Quantity of funded projects Conclusions.
  15. 15. @luismi_barral @pepabarral Now, even though the enthusiast type participates more frequently, the quantity they invest each time is similar to those invested by moderate and cold backers. Question: Think of the last time you funded a project via crowdfunding. Do you remember the quantity of your contribution? Total remember (2.409) Enthusiasts (1.043) Moderates (1.097) Types of backers Cold (264) Base: users who remember the quantity % < 20 euros. % 20 to 50 euros. % 51 to 150 euros. % More than 150 euros. Conclusions.
  16. 16. @luismi_barral @pepabarral The quantity invested by the backers depends in the convenience of the project itself. Particularly depending on two factors: a) The backer’s interest in the proposed activity. The more attractive the project is for that person at that time, the more likely it is for the quantity of the investment to increase. The research shows data which allows us to understand that the project’s level of appeal per se is more powerful than the bonds between the creators and backers when it comes to attracting higher quantities. We’ve found that when the backers are not personally linked to the creators, the quantities invested are superior. It seems like Family and Friends act as splinters that start the fire. The “firewood” is brought by the backers which connect with the naked value of the project: Fools. b) The format of exchange proposed by the project’s creators. In the analysis it has been identified that investment without rewards (pure donations) harvest lower individual quantities than those which offer symbolic perks (t-shirts, badges, mentions in the credits…). At the same time the latter attract lower quantities than those offering a pre- order of a product or service, where the creator commits to produce something valuable for the backer and to deliver it under the conditions agreed between both parties. Here two forces come together, 1) there’s a valuable product/service which will reach the backer, and 2) there’s a commitment of an agreed transaction. Both forces influence the quantity invested positively. Conclusions.
  17. 17. @luismi_barral @pepabarral Total remember (2.409) No reward. (220) Symbolic. (802) Pre-order (1.624) Base: remember the sum. Type of reward in last project Please think of the last time you funded a crowdfunding project. Do you remember the quantity of your contribution? % < 20 euros. % 20 to 50 euros. % 51 to 150 euros. % More than 150 euros. Total remember (2.409) Base: remember the sum. Yes (874) No (1.441) Family or friends of creators? Conclusions.
  18. 18. @luismi_barral @pepabarral In summary… • The Attitude from which the backer approaches crowdfunding (ChangeMaker / Pragmatic) explains whether they invest with more or less frequency. • The Convenience of the project (interest and exchange format) explains whether the individual quantity invested in the project is higher or lower. Conclusions.
  19. 19. @luismi_barral @pepabarral The four qualities with the most potential are of universal nature. This means that they can be applied to all kinds of projects, regardless of theme: ➪ The project proposes something of High Quality. ➪ The project is Feasible, not a fantasy or an illusion. ➪ The project is Clear about Money, easy to understand why the final target is needed. ➪ The project is Communicated in an Attractive Manner. Any project should take care of these four factors, as they will create strong foundations to appeal to the interests of the backers. ➪ If the project is also Innovative, it will also display an added value which will increase its chances to become appealing. What qualities do the most attractive projects have to appeal to the backers? Conclusions.
  20. 20. @luismi_barral @pepabarral There are other secondary qualities attributed to the theme of the project. These are not as universal as the five previously mentioned because the backers’ personal interests are diverse. These qualities include … ➪ The project generates wealth, job opportunities. ➪ The project proposes initiatives that benefit those public sectors most affected by the recession (education, health, environment…) ➪ Solidarity streak: the project looks after those who are most in need. ➪ The project relates to Arts and Culture. ➪ The project favours the creation of a Collaborative Community. And finally in a third level, there are other qualities that are not focal but accompany the rest: ➪ If it’s a business, the project allows the backer to enter as micro-investor and receive micro-returns once it becomes financially stable. ➪ The creators have previous successful experiences in crowdfunding. Conclusions.
  21. 21. @luismi_barral @pepabarral There are also qualities that result in the projects being less attractive for the backers. If these qualities are found in the project, the creator will have to work harder to communicate the most attractive attributes of the project. These qualities may otherwise become a risk by provoking the backers to reject or distance themselves from the idea. We refer to the following qualities… ➪ The project proposal is too risky, awakening doubts about its feasibility. The backer has interest in something new, but it should be sensible enough to sustain the risk. ➪ The project has support from big businesses, or is promoted by famous people. If the project has these resources, the backers have to understand the reason for their involvement: what is their role and why are they supporting or asking for funding. Understanding - making sense - is the way to deactivate the thought “there must be a catch.” Conclusions.
  22. 22. @luismi_barral @pepabarral Conclusions. % Rather yes % Neither yes, nor no % Discourages % DK-NA (7) Clear why that amount of funding is needed Base: total backers, 3.153. % Clearly motivates (2) The project is feasible, not utopic (6) Told in an attractive manner, it’s well communicated (14) Proposes something of high quality (5) Proposes something innovative (3) Charitable project, takes care of the marginalised. (1) It’s about a social cause (health, education…) (9) Creates wealth in some way, jobs opportunities. (10) Related to the arts and culture (8) Allows micro-investment and micro-returns. (13) Creates a community of collaborators (11) The backers have previous successful experiences . (4) It’s a risky proposal (15) Has achieved support from big businesses. (12) Its advocates are famous people 50% What do the most successful projects have to attract the attention of the backers? (*) (*) See question in the next page
  23. 23. @luismi_barral @pepabarral “"We have taken people’s aspects that influence them when they decide to finance or not a crowdfunding project that from the first moment looks interesting to them. We'll show them to you so that you can indicate to what extent they would motivate you or not." (Clearly motivates me / rather yes / Neither yes nor no / rather discourages me / Clearly discourages me). Items shown in random order, one at a time. 1. “"That the project will focus on issues that are common social goods (eg health, education, recycling, energy saving ...)." 2. "That project also seems feasible liking me, not utopian.“ 3. "It is a charity project that deals with the forgotten groups." 4. "May I see a risky proposition. What nobody will finance otherwise. " 5. "That raises some innovation. Something new, it in fields as: Art, culture, products, business ... whatever, but innovative .” 6. "That project is shown in an engaging way. Well communicated” 7. “Let's be clear why they need that amount of money and no other.” 8. “"If it's a business, that gives me the option of micro- investing. Not only timely support with money, but to invest and have a micro-economic return when giving benefits. ” 9. “That the project will create wealth somehow, jobs” 10. “That the project has to be with art and culture.” 11. “"That the developers have already had previous experience of crowdfunding succesful." 12. “That the developers are scocially known people, famous people.” 13. “That the project needs to its development to create a people community collaborating.” 14. “That what projet proposes is something high quality . Whatever it is, but that is high quality made” 15 . “That the project has gained the support of major companies that are supporting him through crowdfunding as a patron more. “ Conclusions.
  24. 24. @luismi_barral @pepabarral Conclusions. Are there qualities that make the backer reject the project? Yes, and they’re clear as we’ve already seen: ➪ If the backer thinks the communication is not attractive enough (the project doesn’t stand out in the general content saturation we live with today). ➪ If they think it’s too idealistic, that the project’s feet don’t touch the ground. ➪ If the backer considers it’s asking too much money for what it wants to achieve. ➪ If the backers think they have to invest too much money to gain an interesting reward (imbalance in the exchange). ➪ If the backer think that the project’s creators are not ready to do what they promise (risk of non-feasibility). If one or more of these qualities are present, it will not only make it difficult to attract funding, it will guarantee a loss in support.
  25. 25. @luismi_barral @pepabarral Conclusions. Do the creators influence the backers?
  26. 26. @luismi_barral @pepabarral Conclusions. Which are the qualities found in the creators that increase the backer’s interest? Honesty Creativity None/Don’t know/No answer % Multiple response. Here’s a list of personal qualities. Please indicate four or five that you value when you see them in the people looking to fund a project via crowdfunding. Base: total backers, 3.153 Items presented at random Enthusiasm, passion Good sense Professionalism Intelligence Experience in the field Courage Ingeniality Belief in themselves Youth Honesty, Creativity and Enthusiasm are the qualities that make the project EXCITING Good sense, Professionalism, intelligence and experience in the field ERADICATE RISK
  27. 27. @luismi_barral @pepabarral Effectively, yes. In these 770 hours, four aspects of doubt appear: ➪ The perceived low quality in some projects inside the platforms: risk of having projects that exist just to make the numbers grow. ➪ The filter that is set up by platforms to determine the promotor’s reliability: risk of having too many of them passing that filter. ➪ In consequence, a new question is proposed on the role that the platforms play in crowdfunding. Risk: are they simply commission agents? If so, their image is that of an “intermediary” instead of a “hub” that facilitates the connections between communities formed by (their) creators and (their) audiences. ➪ The lack of a frame that adds a legal guarantee. Risk of defencelessness : “if there’s a disagreement between the parties, who do I go to?” These four demonstrations of doubt represent the areas where those implicated in crowdfunding have to keep working in if they want to see it gain social recognition and in turn, see it grow as an economic phenomenon. Do backers have doubts about crowdfunding? Conclusions.
  28. 28. @luismi_barral @pepabarral It is up to goverment to promote a legal frame to integrate the legal SECURITY without compromising the creative FREEDOM found in crowdfunding. It is up to the platforms to encourage, promote and filter the QUALITY of the projects and the RELIABILITY of the creators. However, the challenge is in doing so without losing the fresh and spontaneous qualities that come with the phenomenon. Rather, it is up to them to facilitate the right culture conditions so that any person approaching crowdfunding looking for funding become aware of … a) The benefits that mobilise the backers, what motivates them. b) The qualities that attract in projects and creators alike once the backer has come across them. c) And what acts as factors that result in the backer rejecting the project. Conclusions.
  29. 29. @luismi_barral @pepabarral In summary, the research on Lanzanos’ backers shows that Crowdfunding is a phenomenon that conveys … A Change towards something New and Valuable, which is Easy to experience. Making Crowdfunding (even more) Trustworthy will allow it to undergo notable growth in the next three years. It feeds off the social need for change. Free access to the full report (Spanish): Conclusions.