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Reward-based Crowdfunding for 
technology-oriented start-ups 
An empirical investigation along the 
entrepreneurship proce...
Outline 
1. Introduction 
2. Theoretical basis and research questions 
3. Methodology 
4. Results 
5. Conclusion 
G-Forum ...
State of the art about crowdfunding 
• Exploration from different perspectives in various 
disciplines (e.g. Dolata & Schr...
State of the art about crowdfunding 
• Numerous opportunities for empirical investigations 
• So far essentially we observ...
State of the art about crowdfunding 
• Different topics in the various types of crowdfunding 
(i.e. equity-, lending-, rew...
2. Theoretical basis and research questions 
Observation 1: Crowdfunding in the 
entrepreneurial process 
Classic Venture ...
2. Theoretical basis and research questions 
Observation 2: Signals in Crowdfunding 
• Challenges for entrepreneurs: 
– In...
2. Theoretical basis and research questions 
Observation 3: Crowdfunding as 
catalyst for company foundation? 
Classic Ven...
2. Theoretical basis and research questions 
Research questions 
1. In which phase of the entrepreneurial process can 
cro...
Data collection and analysis 
• Automated collection of all (N=1,500) technology 
projects on Kickstarter (04/2009-04/2013...
Interview partners (n=6) 
Interview 
partner (IP) Name Company Product Crowdfunding 
Platform 
IP1 Marijo Sarac Bragi LLC....
Technology projects? 
G-Forum 2014 | Reward-based CF for technology-oriented start-ups | © D. Brüntje et al. Page 12 
3. M...
RQ 1: Entrepreneurial Process 
G-Forum 2014 | Reward-based CF for technology-oriented start-ups | © D. Brüntje et al. Page...
RQ 1: Entrepreneurial Process 
G-Forum 2014 | Reward-based CF for technology-oriented start-ups | © D. Brüntje et al. Page...
RQ 1: Entrepreneurial Process 
G-Forum 2014 | Reward-based CF for technology-oriented start-ups | © D. Brüntje et al. Page...
RQ 1: Entrepreneurial Process 
G-Forum 2014 | Reward-based CF for technology-oriented start-ups | © D. Brüntje et al. Page...
RQ 2: Company foundation as signal 
G-Forum 2014 | Reward-based CF for technology-oriented start-ups | © D. Brüntje et al....
RQ 2: Company foundation as signal 
G-Forum 2014 | Reward-based CF for technology-oriented start-ups | © D. Brüntje et al....
RQ 3: Crowdfunding as catalyst 
G-Forum 2014 | Reward-based CF for technology-oriented start-ups | © D. Brüntje et al. Pag...
RQ 1 & 3: Results Interviews (n=6) 
• Company foundation: 1 before, 5 after 
crowdfunding campaign (! Early-Stage) 
• If c...
Conclusion 
• Crowdfunding seems relevant in every stage of the 
entrepreneurial process, but early-stage financing 
stays...
Implications for research and practice 
• We respond to the call for more research that analyzes the 
relevance of crowdfu...
References 
Agrawal, A.; Catalini, C. & Goldfarb, A. (2011). The geography of crowdfunding. NBER Working Paper Series No. ...
References 
Harzer, A. (2013). Erfolgsfaktoren im Crowdfunding. In: Will, A. & Brüntje, D. (Eds.): Menschen – Märkte – Med...
Contact Information 
Dennis Brüntje 
Media and Communication Management Group 
Institute for Media and Communication Scien...
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Reward-Based Crowdfunding for Technology-Oriented Start-Ups

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Presentation at the 18th Forum Entrepreneurship Research (G-Forum) – Annual Interdisciplinary Entrepreneurship Conference on November 13, 2014 in Oldenburg, Germany.

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Reward-Based Crowdfunding for Technology-Oriented Start-Ups

  1. 1. Reward-based Crowdfunding for technology-oriented start-ups An empirical investigation along the entrepreneurship process Dennis Brüntje, Dieter W. Joenssen, Britta M. Gossel, Thomas Müllerleile, Maike Brehm Ilmenau University of Technology G-Forum 2014 – November 13, 2014 – Oldenburg, Germany
  2. 2. Outline 1. Introduction 2. Theoretical basis and research questions 3. Methodology 4. Results 5. Conclusion G-Forum 2014 | Reward-based CF for technology-oriented start-ups | © D. Brüntje et al. Page 2
  3. 3. State of the art about crowdfunding • Exploration from different perspectives in various disciplines (e.g. Dolata & Schrape 2013; Kuppuswamy & Bayus 2013; Leimeister 2012) • Further establishment of an autonomous field in entrepreneurship research – Conferences (e.g. G-Forum: Brem & Wassong 2013; Hagedorn & Kortleben 2013; Hagedorn 2012; Müller & Walther 2011; IECER: Beier & Wagner 2014; ICEIRD: Müllerleile et al. 2014) – Journals (e.g. Mollick 2014; Moritz & Block 2014; Schwienbacher & Larralde 2012) – Scientific Work Groups (FGF, European and German Crowdfunding network) G-Forum 2014 | Reward-based CF for technology-oriented start-ups | © D. Brüntje et al. Page 3 1. Introduction
  4. 4. State of the art about crowdfunding • Numerous opportunities for empirical investigations • So far essentially we observe … – Industry reports (e.g. Crowdfunding Industry Report) – Literature investigations (e.g. Moritz & Block 2014) – Overview articles (e.g. Hemer 2011) – Model-theoretical comparisons (e.g. Belleflamme et al. 2012, 2010) – Expert interviews (e.g. Steward & Ramos 2014) G-Forum 2014 | Reward-based CF for technology-oriented start-ups | © D. Brüntje et al. Page 4 1. Introduction
  5. 5. State of the art about crowdfunding • Different topics in the various types of crowdfunding (i.e. equity-, lending-, reward- or donation-based) – Regulatory questions (e.g. Germany: Klöhn & Hornuf 2012; USA: Bradford 2012; EU: De Buysere et al. 2012) – Success factors (e.g. Harzer 2012; Müllerleile & Joenssen 2014) – Capital seeker/provider motivation (e.g. Gerber et al. 2012) – Decision behaviour of capital providers (e.g. Burtch et al. 2013; Agrawal et al. 2011) • But only few works analyze data from crowdfunding projects and campaigns (Mollick 2014; for an overview see Moritz & Block 2014) G-Forum 2014 | Reward-based CF for technology-oriented start-ups | © D. Brüntje et al. Page 5 1. Introduction
  6. 6. 2. Theoretical basis and research questions Observation 1: Crowdfunding in the entrepreneurial process Classic Venture Capital Bank loans cf. Moritz & Block 2014:59 based on Hemer 2011:31 Early-Stage-Gap Crowdfunding G-Forum 2014 | Reward-based CF for technology-oriented start-ups | © D. Brüntje et al. Page 6 IPO Seed Venture Capital Business Angels Founder, Friends & Family Sources of finance Pre-Seed / Seed Start-up Emerging Growth Expansion Stage
  7. 7. 2. Theoretical basis and research questions Observation 2: Signals in Crowdfunding • Challenges for entrepreneurs: – Instill confidence in potential clients & investors – Achieve reasonable level of sincerity • Possible signals to reduce perceived risk: – Certain organizational structures – Sound company history – ... G-Forum 2014 | Reward-based CF for technology-oriented start-ups | © D. Brüntje et al. Page 7 Mollick 2014
  8. 8. 2. Theoretical basis and research questions Observation 3: Crowdfunding as catalyst for company foundation? Classic Venture Capital Bank loans Early-Stage-Gap Crowdfunding G-Forum 2014 | Reward-based CF for technology-oriented start-ups | © D. Brüntje et al. Page 8 IPO Seed Venture Capital Business Angels Founder, Friends & Family Sources of finance Pre-Seed / Seed Start-up Emerging Growth Expansion Stage cf. Moritz & Block 2014:59 based on Hemer 2011:31
  9. 9. 2. Theoretical basis and research questions Research questions 1. In which phase of the entrepreneurial process can crowdfunding be relevant for financing start-ups? 2. Are crowdfunding projects, which are proposed either by project initiators not explicitly organized in a legal entity or by recently founded companies, less likely to be funded? 3. What factors that characterize the crowdfunding campaign influence whether the project initiators found a company after the campaign? G-Forum 2014 | Reward-based CF for technology-oriented start-ups | © D. Brüntje et al. Page 9
  10. 10. Data collection and analysis • Automated collection of all (N=1,500) technology projects on Kickstarter (04/2009-04/2013) – Variables: project title, kickstarter url, location, associated website, requested & pledged goal (! success), start date, funding period, number of updates & comments, pledge levels • Manual coding of successful projects (n=707) – Variables: foundation (y/n), date of foundation, legal form, name, associated website, date of “death“ • In-depth interviews with n=6 German start-ups which utilized Kickstarter and Indiegogo G-Forum 2014 | Reward-based CF for technology-oriented start-ups | © D. Brüntje et al. Page 10 3. Methodology
  11. 11. Interview partners (n=6) Interview partner (IP) Name Company Product Crowdfunding Platform IP1 Marijo Sarac Bragi LLC. The Dash Kickstarter IP2 Matthias Bürger Kinematics GmbH TinkerBots Indiegogo IP3 Friedrich Spielhagen LUUV Forward GmbH Camera Stabilizer Indiegogo IP4 Mario Martin Panono GmbH Panoramic Ball Camera Indiegogo IP5 Tore Meyer 4tiitoo GmbH NUIA EyeCharm Kickstarter IP6 Eugen Pflüger Parce UG Parce Indiegogo G-Forum 2014 | Reward-based CF for technology-oriented start-ups | © D. Brüntje et al. Page 11 3. Methodology Brehm 2014
  12. 12. Technology projects? G-Forum 2014 | Reward-based CF for technology-oriented start-ups | © D. Brüntje et al. Page 12 3. Methodology Image Source: https://www.kickstarter.com/discover/categories/technology?ref=discover_index [11/12/2014]
  13. 13. RQ 1: Entrepreneurial Process G-Forum 2014 | Reward-based CF for technology-oriented start-ups | © D. Brüntje et al. Page 13 4. Results n=707
  14. 14. RQ 1: Entrepreneurial Process G-Forum 2014 | Reward-based CF for technology-oriented start-ups | © D. Brüntje et al. Page 14 4. Results n=707
  15. 15. RQ 1: Entrepreneurial Process G-Forum 2014 | Reward-based CF for technology-oriented start-ups | © D. Brüntje et al. Page 15 4. Results n=707
  16. 16. RQ 1: Entrepreneurial Process G-Forum 2014 | Reward-based CF for technology-oriented start-ups | © D. Brüntje et al. Page 16 4. Results n=707
  17. 17. RQ 2: Company foundation as signal G-Forum 2014 | Reward-based CF for technology-oriented start-ups | © D. Brüntje et al. Page 17 4. Results Founded before Founded after Never founded Projects (n) 290 88 329 Pledge goal ($) 15,000 15,000 3,100 Pledged ($) 34,153 37,606 5,843 Goal achievement (%) 167 203 139 Days for funding (total) 31 31.5 30 Pledge levels (total) 9.5 9 8 Comments (total) 43 58.5 11 Backers (total) 267 335.5 95 n=707, median of all projects within groups
  18. 18. RQ 2: Company foundation as signal G-Forum 2014 | Reward-based CF for technology-oriented start-ups | © D. Brüntje et al. Page 18 4. Results Founded before Founded after Never > 1 year < 1 year < 1 year > 1 year founded Projects (n) 193 97 57 31 329 Pledge goal ($) 19,500 10,000 25,000 10,000 3,100 Pledged ($) 43,371 25,496 61,274 16,243 5,843 Goal achievement (%) 156 178 226 179 139 Days for funding (total) 31 31 31 35 30 Pledge levels (total) 10 9 9 7 8 Comments (total) 52 30 71 38 11 Backers (total) 311 248 471 158 95 n=707, median of all projects within groups
  19. 19. RQ 3: Crowdfunding as catalyst G-Forum 2014 | Reward-based CF for technology-oriented start-ups | © D. Brüntje et al. Page 19 4. Results Founded before Founded after Never > 1 year < 1 year < 1 year > 1 year founded Projects (n) 193 97 57 31 329 Pledge goal ($) 19,500 10,000 25,000 10,000 3,100 Pledged ($) 43,371 25,496 61,274 16,243 5,843 Goal achievement (%) 156 178 226 179 139 Days for funding (total) 31 31 31 35 30 Pledge levels (total) 10 9 9 7 8 Comments (total) 52 30 71 38 11 Backers (total) 311 248 471 158 95 n=707, median of all projects within groups
  20. 20. RQ 1 & 3: Results Interviews (n=6) • Company foundation: 1 before, 5 after crowdfunding campaign (! Early-Stage) • If crowdfunding has not been successful, further company development would have been difficult • Faster company development because of successful crowdfunding campaign • Utilization of crowdfunding because of financing and marketing aspects (pre-selling, market-proof) G-Forum 2014 | Reward-based CF for technology-oriented start-ups | © D. Brüntje et al. Page 20 4. Results Brehm 2014
  21. 21. Conclusion • Crowdfunding seems relevant in every stage of the entrepreneurial process, but early-stage financing stays most prevalent. • Company foundation could prove as signal to reduce perceived risks for investors. • Higher goal achievement, pledge goals, amount of backers and backer feedback seem to have a positive influence on company foundation. G-Forum 2014 | Reward-based CF for technology-oriented start-ups | © D. Brüntje et al. Page 21 5. Conclusion
  22. 22. Implications for research and practice • We respond to the call for more research that analyzes the relevance of crowdfunding for entrepreneurship. • We respond to the call for more empirical studies. • We examine the relevance of reward-based crowdfunding for financing technology-oriented projects. • We offer a reflection on crowdfunding beyond the borders of the platform by considering the post-crowdfunding phase. ! New dimension of research for crowdfunding: success and relevance of crowdfunding for entrepreneurs over time. G-Forum 2014 | Reward-based CF for technology-oriented start-ups | © D. Brüntje et al. Page 22 5. Conclusion
  23. 23. References Agrawal, A.; Catalini, C. & Goldfarb, A. (2011). The geography of crowdfunding. NBER Working Paper Series No. 16820. Beck, R. (2014). Crowdinvesting – Die Investition der Vielen. 2nd edition. Leipzig: Amazon. Beier, M. & Wagner, K. (2014). Getting money from the crowd: Drivers of fundraising success. Paper IECER 2014, Chur. Belleflamme, P.; Lambert, T. & Schwienbacher, A. (2010). Crowdfunding: An Industrial Organization Perspective, SSRN Working Paper 2151179. Belleflamme, P.; Lambert, T. & Schwienbacher, A. (2012). Crowdfunding: Tapping the Right Crowd. CORE Discussion Paper No. 2011 / 32, SSRN Working Paper 1578175. Bradford, C. (2012). Crowdfunding and the Federal Securities Laws. Columbia Business Law Review, 2012(1), 1-150. Brehm, M. (2014). Crowdfunding als Instrument des internationalen Marketings für technologische Produkte. Master thesis: Ilmenau. Brem, A. & Wassong, N. (2013). Wer investiert warum? Ergebnisse zu individuellen Investmententscheidungen in Crowdfunding- Projekten. Paper G-Forum 2013, Koblenz. Burtch, G.; Ghose, A. & Wattal, S. (2013). Cultural Differences and Geography as Determinants of Online Pro- Social Lending, SSRN Working Paper 2271298. Crowdfunding Industry Report (2012, 2013). Annual reports by Massolution, Retrieved June 26, 2014 from http:// www.crowdsourcing.org/document/crowdfunding-industry-report-abridged-version-market-trends- composition-and-crowdfunding-platforms/ 14277 & http://research.crowdsourcing.org/2013cf-crowdfunding- industry-report De Buysere, K.; Gajda, O.; Kleverlaan, R. & Marom, D. (2012). A Framework for European Crowdfunding, European Crowdfunding Network. Dolata, U. & Schrape, J.-F. (2013). Zwischen Individuum und Organisation. SOI Discussion Paper 2013-02. Gerber, E. M.; Hui, J. S. & Kuo, P. (2012). Crowdfunding: Why people are motivated to post and fund projects on crowdfunding platforms, Northwestern University, Creative Action Lab. Hagedorn, A. (2012). Crowdinvestment als Finanzierungsform für Unternehmensgründungen in Deutschland. Eine kritische Analyse. Paper G-Forum 2012, Potsdam. Hagedorn, A. & Kortleben, H. (2013). Eine Analyse des Investitionsverhaltens beim Crowdinvesting. Die Rolle der Motivation und asymmetrisch verteilter Information. Paper G-Forum 2013, Koblenz. G-Forum 2014 | Reward-based CF for technology-oriented start-ups | © D. Brüntje et al. Page 23
  24. 24. References Harzer, A. (2013). Erfolgsfaktoren im Crowdfunding. In: Will, A. & Brüntje, D. (Eds.): Menschen – Märkte – Medien – Management: Schriftenreihe; 7. Ilmenau: ilmedia. Also available from http://www.db- thueringen.de/servlets/ DocumentServlet?id=20873 Hemer, J. (2011). A Snapshot on Crowdfunding. Working Papers Firms and Region No. R2/2011, Fraunhofer ISI. Klöhn, L. & Hornuf, L. (2012). Crowdinvesting in Deutschland – Markt, Rechtslage und Regelungsperspektive, in: Zeitschrift für Bankrecht und Bankwirtschaft ZBB, 24(4), 237-266. Kickstarter (2014). Kickstarter Stats. Retrieved June 27, 2014 from https://www.kickstarter.com/help/stats Kuppuswamy, V. & Bayus, B. L. (2013). Crowdfunding Creative Ideas: The Dynamics of Project Backers in Kickstarter. SSRN Working Paper 2234765. Leimeister, J. M. (2012). Crowdsourcing: Crowdfunding, Crowdvoting, Crowdcreation. Zeitschrift für Controlling und Management (ZFCM), 56, 388-392. Mollick, E. (2014). The dynamics of crowdfunding: An exploratory study. Journal of Business Venturing, 29, 1-16. Moritz, A. & Block, J. (2014). Crowdfunding und Crowdinvesting: State-of-the-Art der wissenschaftlichen Literatur. Zeitschrift für KMU und Entrepreneurship, 62(1), 57-89. Müller, C. & Walther, T. (2011). Kritischer Vergleich von Crowd-Funding Angeboten. Paper G-Forum 2011, Zürich. Müllerleile, T. & Joenssen, D.W. (2014). Key Success-Determinants of Crowdfunded Projects: An Exploratory Analysis. In: Lausen, B.; Krolak-Schwerdt, S. & Böhmer, M. (Eds.). (in press). Data science, learning by latent structures, and knowledge discovery. Springer: Heidelberg. Müllerleile, T.; Joenssen D.W. & Müllerleile, A. (2014). Crisis, Co-Financing, and Crowdfunding: Igniting Regional Development. In: Papadopoulos, G.; Ketikidis, P. & Kofteros, S. (Eds.), Proceedings of the 7th international conference for entrepreneurship innovation and regional development, 277-285. SEERC, Nicosia. Schwienbacher, A. & Larralde, B. (2012). Crowdfunding of Small Entrepreneurial Ventures, in: Cumming, D. (Eds.): The Oxford Handbook of Entrepreneurial Finance, New York: Oxford University Press, 369-391. Steward, J. & Ramos, J. (2014). Crowdfunding and the Role of Managers in Ensuring the Sustainability of Crowdfunding Platforms. JRC Scientific and Policy reports. European Commission. EUR 26596 EN. G-Forum 2014 | Reward-based CF for technology-oriented start-ups | © D. Brüntje et al. Page 24
  25. 25. Contact Information Dennis Brüntje Media and Communication Management Group Institute for Media and Communication Science – Ilmenau University of Technology Ernst-Abbe-Zentrum – Ehrenbergstraße 29 – D-98693 Ilmenau – Germany T: +49-3677-69-4680 F: +49-3677-69-4650 E: dennis.bruentje@tu-ilmenau.de www.tu-ilmenau.de/mkm www.facebook.com/fgmkm www.twitter.com/fgmkm G-Forum 2014 | Reward-based CF for technology-oriented start-ups | © D. Brüntje et al. Page 25

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