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

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. Outline
1. Introduction
2. Theoretical basis and research questions
3. Methodology
4. Results
5. Conclusion
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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)
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1. Introduction

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)
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1. Introduction

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)
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1. Introduction

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
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IPO
Seed Venture Capital
Business Angels
Founder, Friends & Family
Sources of
finance
Pre-Seed / Seed Start-up Emerging Growth Expansion Stage

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
– ...
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Mollick 2014

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. 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?
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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
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3. Methodology

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
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3. Methodology
Brehm 2014

12. Technology projects?
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3. Methodology
Image Source: https://www.kickstarter.com/discover/categories/technology?ref=discover_index [11/12/2014]

13. RQ 1: Entrepreneurial Process
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4. Results
n=707

14. RQ 1: Entrepreneurial Process
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4. Results
n=707

15. RQ 1: Entrepreneurial Process
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4. Results
n=707

16. RQ 1: Entrepreneurial Process
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4. Results
n=707

17. RQ 2: Company foundation as signal
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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. RQ 2: Company foundation as signal
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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. RQ 3: Crowdfunding as catalyst
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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. 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)
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4. Results
Brehm 2014

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.
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5. Conclusion

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.
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5. Conclusion

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.
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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
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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.
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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.
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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
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