Crowdfunding Social Entrepreneurship; The Influential Factors in Crowdfunding Success for Social Entrepreneurs

Abstract

Crowdfunding has emerged as an increasingly important and popular alternative to traditional funding, as entrepreneurs often face difficulties in receiving funding from the traditional channels in the vital early stages of a new venture or project. In its simplest form, crowdfunding is the attempts by entrepreneurial individuals or groups to fund a venture or project by tapping a large network of people through the internet for relatively small monetary contributions, without standard financial intermediaries. In addition, social entrepreneurs have been found to face difficulties in securing financing to their ventures as traditional investors often consider them to have unclear or dichotomous objectives, where they are torn between the social and commercial. Hence, previous research has reported about the importance of crowdfunding in a social entrepreneurship context, for its multidimensional potential in successfully raising money for a good cause. This paper investigates what factors influence the success of social entrepreneurial crowdfunding campaigns, to provide social entrepreneurs with indications of what factors to include in a crowdfunding campaign to increase the likelihood of success. This is done by analyzing 101 ended crowdfunding campaigns, posted on the social crowdfunding platform StartSomeGood. A binary logistic regression is used on the collected observations to examine what factors are significantly influencing the successful outcome of a campaign. The findings suggest that the social entrepreneurs should include a front page picture, calls for urgency, and a high amount of reward categories in the campaign to positively influence the success. It was also found, in contradiction to suggestions in previous literature, that the location of the campaign can have a significantly negative impact on the outcome of the campaign. However, the researchers argue that the social aspect of the campaign outweigh many of the success factors found in previous crowdfunding literature regarding traditional entrepreneurs, as backers are more prone to invest in the idea and core value of a venture rather than the collaterals or business plan offered. Conclusively, the researchers suggest that the most important factor for social entrepreneurs in order to successfully reach their funding goal is to effectively communicate the unique value of their social contribution, and a social goal that the backers can relate to, in order to appeal to the altruistic and philanthropic incentives for backers to fund. The practical implications in this paper offer valuable insights for social entrepreneurs considering to engage in crowdfunding, by deepening the understanding of what factors to include in the campaign in order to influence the likelihood of success. Also, the intermediary platforms, and especially StartSomeGood, can benefit from this study as it provides indications of how to improve the outline of the platform to further facilitate for the campaigns to succeed.