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

By Douglas J. Cumming, Gaël Leboeuf, Armin Schwienbacher. Financial Management, 2019

493 citations recorded by the source corpus.

Reward-based crowdfunding campaigns are commonly offered in one of two models. The “Keep-It-All” (KIA) model involves the entrepreneurial firm setting a fundraising goal and keeping the entire amount raised, regardless of whether or not they meet their goal, thereby allocating the risk to the crowd when an underfunded project goes ahead. The “All-Or-Nothing” (AON) model involves the entrepreneurial firm setting a fundraising goal and keeping nothing unless the goal is achieved, thereby shifting the risk to the entrepreneur. We show that small, scalable projects are more likely to be funded through the KIA scheme, while large non-scalable projects are more likely to be funded through the AON scheme. Overall, KIA campaigns are less successful in meeting their fundraising goals, consistent with a risk-return tradeoff for entrepreneurs, where opting for the KIA scheme represents less risk and less return for the entrepreneur.

Subfields: Economics and Econometrics, Information Systems, Management Information Systems

View Paper: https://www.semanticscholar.org/paper/07ab6b70daa57c49c0cae93594a0892f8f4632e2

How researchers see this paper

The researchers whose trusted networks rank it highest, strongest advocate first. Every researcher gets a different order.

In Economics and Econometrics

1. Saul Estrin
2. Daniel Gozman
3. Susanna Khavul
4. K. Meyer
5. Mike W. Peng
6. Alvaro Cuervo‐Cazurra
7. Garry D. Bruton

In Information Systems

1. Saul Estrin
2. David B. Audretsch
3. Maksim Belitski
4. Ute Stephan

In Management Information Systems

1. Saul Estrin
2. Daniel Gozman
3. Susanna Khavul

Citations in the corpus

• The evolution and adoption of equity crowdfunding: entrepreneur and investor entry into a new market (2018, background): “This may encourage others to invest, in the knowledge that some investors have already taken the plunge (Cumming et al. 2014).”
• Gender differences in the contribution patterns of equity-crowdfunding investors (2017, unknown): “are based on “all-or-nothing” model (Cumming et al. 2014), meaning that firms only receive the pledged capital if they reach a predefined goal.”
• What do crowdfunding platforms do? A comparison between investment-based platforms in Europe (2017, unknown): “Cumming et al. (2015) focus on campaign mechanisms, showing that small projects are more likely to receive funding through the ‘‘keep-it-all’’ scheme, while large projects have a higher probability of receiving funding through the ‘‘all-or-nothing’’ system.”
• Are Blockchain Crowdsales the New 'Gold Rush'? Success Determinants of Initial Coin Offerings (2018, unknown): “Some projects offer investor protection in the form of a soft cap mechanism (variable soft cap), which is similar to the all-ornothing mechanism in crowdfunding (see Cumming, Gaël, and Schwienbacher, 2015).”
• Signalling entrepreneurs’ credibility and project quality for crowdfunding success: cases from the Kickstarter and Indiegogo environments (2021, unknown): “The latter means that entrepreneurs can retain all contribution of funds from the crowd even if the projects did not reach the funding goal (Cumming et al., 2019).”