What motivates crowdfunders?

Reward-based crowdfunding is the most common type of crowdfunding, and is basically a way for creators to fund projects through small capital contributions from a large group of individuals. In return for the contributions, the individuals receive a reward, which can range from a simple thank-you postcard to a production version of the crowdfunded product.

We currently still have a limited understanding of what investors are motivated by when crowdfunding. If we know why people crowdfund we can improve marketing efforts and the success rates for crowdfunded projects. Increasing the success rate will both benefit the crowdfunding platform through improved earnings, as most of them charge a transaction fee of the amount successfully funded, and the economy as it can contribute to economic growth and job creation through the innovation, development and production of goods and services.

Based on behavioral economic theory we identified three main motivational drivers behind people’s reason for crowdfunding:

• Investors are motivated by receiving a material good (material motivation)
• Investors are motivated to help and support others (impure altruism motivation)
• Investors are motivated to enhance their social image (image motivation)

In order to investigate these motivational drivers, we conducted a survey and a field experiment. This allowed us to gather both behavioral data (what do people actually do) and survey data (what do people say they would do and why). Both investigations were performed in collaboration with the Danish reward-based crowdfunding platform Booomerang.

The survey were conducted in order to acquire insights on the investors’ view of their motivation in crowdfunding. In total 313 Booomerang subscribers answered the survey, which was distributed via a newsletter.

Further, we preformed a field experiment in order to observe the actual behavior. We randomly assigned Booomerang’s 19,317 subscribers to one of three treatment groups. Each treatment group received a newsletter designed to trigger one of the three motivational drivers through framing; in the newsletters crowdfunding was framed as either a purchase, a charitable act, or a way to be recognized as a crowdfunder.

Unique links directing the participants to Booomerang’s homepage were included in each treatment newsletter in order to track the participants’ motivation and behavior. Data was collected through Mailchimp and Google Analytics and was used to investigate whether people responded differently depending on which attributes of crowdfunding were salient in the newsletter.

We find that participants who received to the newsletter where crowdfunding is framed as a charitable act have a significantly higher probability of clicking on the link in the newsletter compared to those how received the newsletter where crowdfunding was framed as a purchase or as a way to increase their social status. Hence, the participant in our experiment seems to be motivated the most if crowdfunding is associated with supporting and helping others. These findings are in line with the motivation stated in the survey.

In the future, Booomerang and other crowdfunding platforms can improve their communication with their investors by highlighting the altruistic component of crowdfunding.

— The study was carried out together with Signe Birkegaard Elkjær, Caroline Renée Jensen and Booomerang

Christina Gravert

Christina.gravert@impactually.se

+ 45 50 17 43 32

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