Crowdfunding models: Keep-It-All vs. All-Or-Nothing

Douglas Cumming, Gaël Leboeuf, Armin Schwienbacher

    Research output: Contribution to journalArticlepeer-review

    44 Citations (Scopus)

    Abstract

    Reward‐based crowdfunding campaigns are commonly offered in one of two models via fundraising goals set by an entrepreneur: “Keep‐It‐All” (KIA), where the entrepreneur keeps the entire amount raised regardless of achieving the goal, and “All‐Or‐Nothing” (AON), where the entrepreneur keeps nothing unless the goal is achieved. We hypothesize that AON forces the entrepreneur to bear greater risk and encourages crowdfunders to pledge more capital enabling entrepreneurs to set larger goals. We further hypothesize that AON is a costly signal of commitment for entrepreneurs yielding a separate equilibrium with higher quality and more innovative projects with greater success rates. Empirical tests support both hypotheses.
    Original languageEnglish
    Pages (from-to)331-360
    Number of pages30
    JournalFinancial Management
    Volume49
    Issue number2
    Early online date8 Jan 2019
    DOIs
    Publication statusPublished - Jul 2020

    ASJC Scopus subject areas

    • Accounting
    • Finance
    • Economics and Econometrics

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