Does the crowd mean business? An analysis of rewards-based crowdfunding as a source of finance for start-ups and small businesses

• Published in: Journal of small business and enterprise development Vol. 25; no. 1; pp. 147 - 162
• Main Authors: Cox, Joe, Nguyen, Thang
• Format: Journal Article
• Language: English
• Published: Bradford Emerald Publishing Limited 06.02.2018; Emerald Group Publishing Limited
• Subjects: Crowdfunding; Datasets; Donations; Entrepreneurial finance; Entrepreneurs; Fund raising; Internet; Peer to peer lending; Performance evaluation; Small business; Startups; Venture capital; United Kingdom > UK; Canada; United States > US; Financial sources; Small business; Reward-based crowdfunding; Entrepreneurial finance
• ISSN: 1462-6004; 1758-7840
• DOI: 10.1108/JSBED-05-2017-0165

Purpose The purpose of this paper is to investigate the extent to which rewards-based crowdfunding really does provide financial support for start-ups and small businesses relative to other types of activity such as creative and cultural projects. Design/methodology/approach The paper reports findings from a series of multiple regression on a unique data set covering around 205,000 rewards-based crowdfunding projects across a number of leading platforms in the USA, the UK and Canada. Findings The authors report two main findings. First, rewards-based crowdfunding is highly inequitably distributed and that success is concentrated within a relatively small number of platforms and campaigns. Second, crowdfunding campaigns explicitly related to business perform relatively poorly compared with those in other categories; particularly those in creative areas such as music and dance. Originality/value These findings call into question the extent to which rewards-based crowdfunding really is a means by which significant numbers of start-ups can bridge gaps in the provision of finance.