Research: Crowdfunding Models: Keep-it-All vs. All-or-Nothing

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NCFA Canada | Doug Cumming | June 9, 2014

Everything or nothing

Rewards-based crowdfunding campaigns are commonly offered in one of two models: “Keep-it-All” (KIA) where the entrepreneurial firm sets a fundraising goal and keeps the entire amount raised regardless of whether or not they meet their goal, and “All-or-Nothing” (AON) where the entrepreneurial firm sets a fundraising goal and keeps nothing unless the goal is achieved.

We provide large sample evidence consistent with the view that the usage of AON is a credible signal to the crowd that the entrepreneur commits not to undertake the project if not enough is raised. This signal reduces the risk to the crowd, thereby enabling the AON entrepreneurial firms to set higher goals, raise more money, and be more likely to reach their stated goals.

In contrast, KIA projects tend to be less successful, since the crowd bears the risk that an entrepreneurial firm undertakes a project that is underfunded and hence more likely to fail after the campaign. Entrepreneurs use the KIA model for scalable projects; that is, projects that are still feasible with partial funding. Further, we provide evidence that the crowd is much more sensitive to information provided by AON projects.

We show that these findings are robust to a number of robustness checks, including but not limited to use of instrumental variables and propensity score matching.

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The National Crowdfunding Association of Canada (NCFA Canada) is a cross-Canada crowdfunding hub providing education, advocacy and networking opportunities in the rapidly evolving crowdfunding industry. NCFA Canada is a community-based, membership-driven entity that was formed at the grass roots level to fill a national need in the market place. Join our growing network of industry stakeholders, fundraisers and investors. Increase your organization’s profile and gain access to a dynamic group of industry front runners. Learn more About Us or contact us at casano@ncfacanada.org.

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