Crowdfunding and rewards

In 2010, newspapers and magazines such as The New York Times, The Economist, Wall Street Journal or El País published a series of articles about novice entrepreneurs that, in order to develop software, object design or short-films, were asking for small financial contributions through the Internet. These initiatives are part of a renewed way of raising funds that, with the help of technology, funds projects with small contributions of a large group of people instead of a few large injections. 

Although crowdfunding is only recently attracting the attention of the general public, is been used in the creative industries as an alternative form of financing for over a decade. It has evolved considerably: several specialized platforms now offer practical and fast alternatives for anyone to start a fundraising campaign. 

While the campaigns are run through fairly simple interfaces that enable participation of different kinds of users, the activity itself is quite complex. For starters, it is not based solely upon the request for donations, but in a rather novel form of economic activity, in which the consumer takes a much more active role. They not only do they act as consumers of finished products but also (1) finance the product, choosing which are produced and which are not; (2) modify the product, through feedback and even having a role in the creative process; and (3) promote the product through word-of-mouth in social networks.

One of the important factors in this process is the reward. In order to attract more funders – and consequently raise the capital needed to develop the project – many entrepreneurs offer products or services in exchange for financial contributions. In crowdfunding platforms, by just browsing projects of books, albums, movies, we can identify a huge variety of rewards. From simple thank-you notes to being able to choose the name of a character in a novel, the rewards go far beyond the simple copy of the final product. The levels of contribution are also quite heterogeneous, in order to involve a larger number of funders.

Even though it is a growing phenomenon, crowfunding has been scarcely studied so far. Previous studies that analyse the collective funding of creative projects suggest the funding process is very close to the exchange in commerce.

In this paper we analyze the relationships between creative projects and rewards offered to their financial backers, studying the supply and demand for products and services in this new form of business from the point of view of marketing and sales.

We conducted a quantitative study of the rewards offered by projects funded through the Kickstarter platform in 2010. With a sample of 391 projects from 13 different categories, we analyzed 59,478 rewards to understand how they contribute to the funding of the project.