Abstract
In this chapter, the authors first provide an overview of the crowdfunding phenomenon. Through the literature review of crowdfunding success factors in the four models, the authors then summarize that the current entrepreneurial research focused on success factors has failed to sufficiently examine how the power of words would affect crowdfunding. Therefore, the authors propose that non-verbal and verbal cues are crucial to entrepreneurial financing success. Based on the insufficient research related with those cues, especially the non-verbal ones, the authors open an area of study on non-verbal and verbal cues in the entrepreneurial financing process by conducting and writing this chapter.
TopBackground
Crowdfunding has seen a tremendous growth over the past decade (Mollick, 2014). According to the crowdfunding industry statistics, the total amount of financial support increased about 50 folds in 5 years (from 1.5 billion in 2011 to 73.9 billion in 2016). The crowdfunding industry is predicted to reach the total volume of over $300 billion by 2025 (CFX Alternative Investing Crowdfunding Statistics, 2016). It is therefore not surprising that many researchers have started to study the phenomenon. Nonetheless, crowdfunding research is still at its infancy stage, and so research has still been evolving. The earliest definition about crowdfunding could be traced back to an online article in 2006. Howe (2006) defines the phenomenon as “crowdsourcing” by illustrating an image-sharing project----Istockphoto. Belleflamme, Schwienbacher and Larralde (2010, P.7) believe the concept of crowdfunding is embedded in crowdsourcing, and could be defined as involving “an open call, essentially through the Internet, for the provision of financial resources either in form of donation or in exchange for some form of reward and/or voting rights.”
More recently, Mollick (2014, P.2) defines crowdfunding as “the efforts by entrepreneurial individuals and groups (cultural, social and for-profit) to fund their ventures by drawing on relatively small contributions from a relatively large number of individuals using the Internet, without standard financial intermediaries”. The authors adopt this dominant definition in the chapter.
Key Terms in this Chapter
Equity-Based Crowdfunding: A crowdfunding model in which funders are treated as equity stakeholders with profit sharing in return of their investments.
Donation-Based Crowdfunding: A crowdfunding model that is similar to charity funding, which investors just donate for goodwill and acknowledgement.
Reward-Based Crowdfunding: A crowdfunding model offers funders with pre-ordering product, services, or some incentives as the return of backers’ investments.
Crowdfunding: A method of financing by collecting small amounts of contributions from a large crowd of people, usually through the internet.
Non-Verbal Cues: Communication among people that do not involve a direct verbal translation. It contains dynamic cues such as body movements and facial expressions, static cues such as demographic and physical characteristics and paralinguistic cues such as speech volume and vocal tone.
Lending-Based Crowdfunding: A crowdfunding model that investors offer funds through small loans and earn the returns through interest payments from the borrowers.
Success Factor: A management term for an element that is essential and necessary to achieve the crowdfunding project funding goal.