Running Head: KICKSTARTER REWARD-BASED CROWDFUNDING (RBCF) PLATFORM

Kickstarter Reward-Based Crowdfunding (Rbcf) Platform

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Introduction

The creativity and appealing nature of a reward based crowdfunding idea is a vital aspect

of ensuring that a project has realized the needed number of donations. Considering that Reward

based crowdfunding is used about the form of crowdfunding whereby the business or

entrepreneur receives donations for a reward, ensuring that one has the most creative and

appealing idea is central to ensuring they have received the needed funds for their projects. The

incentives for donations are effective since the contributors are left feeling more valued and

interested in the campaign. Overall, the paper is going to assess a crowd-funded model based on

its quality and impact, the amount raised as well as asserting the reasons that made the project

work.

Literature Review

Reward-based crowdfunding has become an increasingly popular mode of financing for

the early stages of a startup. Crowdfunding models allow entrepreneurs to demonstrate their

business ideas and further rise funding from a huge number of online backers (Chan, Park, Patel,

and Gomulya, 2018). Between the year 2009 and 2017, there have been 137,000 projects that

have been successfully crowdfunded, raising more than $3.4 billion from more than14 million

backers that were on different Kickstarter platforms (Chan et al., 2018). The examination of the

popularity of Kickstarter and other platforms indicates that the crowdfunding phenomenon has

expressively changed the financing models for starting new ventures (Chan et al., 2018).

The desire to comprehend the determinants that shape crowdfunding implications has

lately become an integral research subject. Researchers have relied on diverse theoretical models

to assess the diverse determinants that influence the success of crowdfunding (Mollick, 2014).
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Although economists and psychologists on most occasions depend on signaling or information

processing perspectives to adopt the impacts of project quality cues, researchers relying on

sociological perspectives as institutional and network theories mostly assess the location

implications of a project (Agrawal, Catalina and Goldfarb, 2014). These studies have

documented an assortment of determinants that impact crowdfunding implications ranging from

project level determinants as the quality of the product cues and video presentation to location

level determinants like cluster technology and culture (Blundell, Lockett and Wang, 2017).

Although these models exist, there is concern over the lack of an overreaching framework

that will theoretically organize the determinants and empirically compare the relative impacts.

Such a framework is essential for both types of research as well as practical objectives (Chan et

al., 2018). When it comes to research objectives, the model could aid scholars not only in the

organization of the existing findings but further offer possible guidance for future research (Halt,

Donch, Stiles. and Fesnak, 2017). On the practical perspectives, dealing with the question could

inform the entrepreneurs of the most effective ways of allocating the limited resources to raise

crowdfunding appropriately.

Systems Theory and Crowdfunding

Application of systems theory in investing the determinants of reward-based

crowdfunding focuses on the assessment of the complexities that exist among those

organizations that are within a large system. The model considers individual entities as firms and

entrepreneurs to be inseparable from their environmental attributes as product categories,

industries, and geographic locations. These characteristics are connected within a huge system

and ought to be assessed together.

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Management scholars have relied on the systems theory model to comprehend the

relative impacts of industry, CEOs, firm resources or entrepreneurs on the performance of a firm.

Crowdfunding, in this case, is the form of crowdsourcing considered being the act of outsourcing

a task to a crowd (Belleflamme, Lambert and Schwienbacher, 2014). The model is designed to

allow entrepreneurs raise to fund from a huge number of people congregating on an online

platform whose objective is to link entrepreneurs with backers who are interested in offering a

small amount of capital for the entrepreneurial projects of their choosing (Belleflamme, Lambert

and Schwienbacher, 2014). Most types of crowdfunding can be categorized into equity, debt or

reward based (Belleflamme, Lambert and Schwienbacher, 2014).

The debt based crowdfunding encompasses the types of projects that borrow money from

the crowd having a pre-established payback amount as well as period (Timmons and Spinelli,

1994). The equity-based crowdfunding encompasses those projects that offer ownership in

exchange of some investment amount while reward based crowdfunding is the type of projects

that seek for small donations from the crowd in exchange for some form of reward that ranges

from “thank you” notes to shipping of the actual products or services that were proposed in the

project (Hörisch, 2015)

While equity-based crowdfunding has been projected to change the landscape of venture

financing most meaningfully possibly, the corresponding legislation and regulations for equity-

based crowdfunding have only been approved (Hörisch, 2015).

The Impact of the Project

The project level attributes significantly impact the outcomes of crowdfunding.

Considering the limited proof of product or service concept in addition to the limited information
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on the background of the entrepreneur, most of the crowdfunding studies focus on assessing the

project related attributes that influence the outcomes of crowdfunding (Hörisch, 2015). For

instance, the crowdfunding projects that had videos and had less spelling errors had the greatest

likelihood of being funded. Other project attributes as fluency of the project name, word count,

novelty of the project as well as quality further impact the number of backers as well as their

satisfaction. The form of emphasis on the effect of the project attributes is not exclusively

proposed in the crowdfunding studies although studies on entrepreneurial finances have long

highlighted the significance of visible signals that are related to investment opportunity

attributes.

In line with the literature on observational learning, limited information can prompt

herding in crowdfunding investment. Since crowd funders cannot directly investigate the quality

of projects, it is possible to rely on the funding patterns of the other crowd funders in arriving at

their own funding decisions (Ebben and Johnson, 2006). The initial funding activities can be

considered as informative since they reflect the private interpretation of the information by other

funders relating to the quality of the project.

Effect of the Project Category

Majority of reward based crowdfunding projects need entrepreneurs to place their

projects in a specific product category. Therefore, projects are commonly nested within diverse

product categories funding (Harrison, 2013). The product categories are analogous to the

industry categories that these entrepreneurs focus on competing in to raise the desired funding

(Harrison, 2013). Each project category can exhibit diverse projects as well as distinct

investment patterns as well as preferences. For instance, projects that are in the technology
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product category could have more sophisticated investors and that setting up such projects would

demand significant effort and tie from an entrepreneur while the costs of setting up for the

project in arts and entertainment product category will not be as high, and investors are not as

sophisticated (Harrison, 2013).

Comparing compare reward based crowdfunding with equity crowdfunding model

The equity-based crowdfunding offers a description of the process whereby individuals

invest in a business focusing on the return for shares on the company. The form of crowdfunding

is more directed towards industrial, technological and professional business and services with the

campaigns lasting for months and startups requesting $100, 000 and more (Ahlers et al., 2015).

The reward based crowdfunding focuses on the crowd contributing towards a campaign to get a

reward which is in the form of product that the projector developer has launched via the

campaign funding (Harrison, 2013). The benefits of this form of funding are that one does not

launch a project in debt or give stakes of the venture to the investors as is the case in equity

crowdfunding (Ahlers et al., 2015). Both crowdfunding models have different objectives and

appeal to different people.

A reward-based crowdfunding project- GENUSEE - Eyewear made in Flint from

recycled water bottles

The project by GENUSEE is intended to address an assortment of issues that are a major

concern to the society and a major issue for environmentalists. They are focused on addressing

the extensive challenge posed by environmental pollution via plastic waste (GENUSEE, 2019).

The fact that it is only 23% of the single-use plastic water bottles that are recycled annually

implies that t is a major environmental issue especially considering that it takes 45 years for a
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plastic water bottle to decompose on a landfill (GENUSEE, 2019). During the water crisis that

affected the city of Flint, more than 20 million water bottles were being used daily to meet the

daily needs of the community. Genusee focuses on the use of pre-existing materials in the supply

chain rather than creating new ones. Through the redesigning lifecycle of plastic water bottles as

well as upcycling bottles into a product of needed and purpose, Genusee has ensured that they

bring the value of rPET back into the community (GENUSEE, 2019).

Source: GENUSEE, official website (2019).

Diagram 1: benefits of the recycling

I have selected the model and campaign due to the relevance it has as a business as well

as the fact that it offers solutions to the prevailing social issue that will attract a crowd to the

project. The model reflects on the most integral aspects of a project that needs crowdfunding in
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the context of the effect it will have in the community which will be the creation of employment,

protect the environment, donate to other charity organizations in the society and further promotes

the circular economy (Giudici, Guerini, and Rossi-Lamastra, 2018). Additionally, the fact that

the project is in the social category implies that it is not complicated and thus will attract more

people who will easily understand and identify with their mission (Ahlers, Cumming, Günther,

and Schweizer, 2015).

Source: GENUSEE, official website (2019).

Fig 2: benefits for the society

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Source: GENUSEE, official website (2019).

Fig 3: sample glasses

Impact of the Project Campaign Markers

The video created for the project is of excellent quality. The narrators have ensured that

they buy in the masses by describing all the information that is covered in the project. Their

explanation has further been comprehensive and easy to follow for a layperson who is interested

in learning what the project is about. The fact that they demonstrate the product to the viewers is

an attribute that promotes their proof of concept, thus making them more reliable and trustworthy

(Mollick, 2014).

The narrative as generated by the project owners has done an excellent job in selling their

vision and mission with the viewer. They have covered all the issues needed by an interested

party. The video is clear regarding the image and sound. These are ultimate attributes when it
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comes to delivery of a message seeking for donations as the viewers can see what the project is

about and additionally establish the reason their donations are needed.

On the issue of updates, it is evident that the Genusee has been maintaining constant

updates on their website. They have maintained constant updates on their website informing their

clients on issues such as delivery deadlines (GENUSEE, 2019). They additionally update the

clients on any issues they encounter that could derail them from meeting the described deadlines.

They further engage their clients by requesting them to tag the company in photos with their

glasses on social media sites using the tag #WeAreGenusee (GENUSEE, 2019). All these

strategies that the company has used in their websites are central to the creation of a loyal

following and recruiting new clients and crowds that desire to support their mission through

donations (Mollick, 2014).

On the comments from funders, it can be seen that the company has maintained an

effective interaction from the funders. All comments, both the negative encompassing

complaints and clarifications over the delivery of their glasses and positive feedback concerning

the delivery can be seen (GENUSEE, 2019). The company has further ensured that they respond

and offer clarifications on all the issues highlighted by the clients have causing displeasure.

Overall, it can be seen that the company has ensured that it keeps is funders and prospects well

apprised on all the issues affecting their company and their products. Their commitment to

keeping an updated clientele is evident in the fact that they have ensured they address every

concern raised by the clients (Mollick, 2014).

Genusee offers an assortment of rewards to their funders especially based on their

contributions. For the funders donating $1, the company ensures that they are provided with
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constant project updates (GENUSEE, 2019). For those donating $25 and more, Genusee will

include their name as a community partner in the flint mural (GENUSEE, 2019). The funders

donating US$ 79 and more will be able to save $50 off the intended retail price of $129

(GENUSEE, 2019). They will additionally get 1*Genusee frames of their color of choice, get an

SV prescribed lens along with a polishing bag (GENUSEE, 2019). Funders donating US$89 and

more will save $40 off the intended $129 retail price (GENUSEE, 2019). They will further get

1*Genusee frames of their color of choice, get a UV tinted lens along with a polishing bag.

There will additionally be a tree planted in flint in honor of the donor (GENUSEE, 2019).

The other reward category is the US$189 and more donors who will get two pairs of

Genusee frames at the cost of $70 off the retail price of $258 (GENUSEE, 2019). They will

additionally be allowed to mix and match their colors with the lenses. The US$ 1500 funders will

be provided with glasses for life (GENUSEE, 2019). They will get a membership to glasses for

life and their names added as a community partner in the flint mural. The US4, 500 and more

funders will be provided with four pairs of their choosing (GENUSEE, 2019). They will

additionally be added to the glasses for life membership, have a frame style named in their honor

and name included as a community partner in the company’s flint mural (GENUSEE, 2019).

These reward classes are meant to ensure that none of those desiring to support the

project will be overlooked as they cannot afford. It additionally ensures that through the

recognition, each of the funders feels that their contribution has been acknowledged especially in

the company’s community mural flint (GENUSEE, 2019). Further, in the case of discounts and

free glasses, the company has ensured that they make the funders part of the Genusee movement

which is central to recruiting new clients and funders (Hörisch, 2015).

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Considering the academic literature and evidence one of the attributes that worked in the

current project is the delivery of the message in a manner that aroused interest from the crowd.

The project captured the intimate community and environmental issues that each of the funders

felt was relevant and appropriate. Through this, the project attained the needed goodwill for the

project (Giudici, Guerini and Rossi-Lamastra, 2018).

On the issue of what did not work, the project description over promised the quality of

glasses by guaranteeing the funders that they would get clear frames. The attribute would be

impossible to attain with recycled material, which contributed to dissatisfaction in part of the

funders when they failed to get the desired clear frames (Hörisch, 2015).

Overall, I would use the funders who have received the glasses and record interviews

with them on the website. Through this, the current clients and prospective ones will realize the

reliability and honesty of our project which will be essential in raising the needed amount of

money (Giudici, Guerini and Rossi-Lamastra, 2018).

The campaign creators could pitch the project differently by making the entire project a

community-owned project. In this case, issues, as collecting the bottles and processing them,

would be a community undertaking as a means of increasing project ownership. The greater

portion of proceeds that will be gained from this venture will be used to fund water and other

community welfare undertakings. The strategy will ensure that funders will be fighting to have a

positive impact on the society, which will enhance the amount and rate at which the donations

are made (Ahlers, Cumming, Günther, and Schweizer, 2015).

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Conclusion

The best strategy for the success of crowd-based funding is to ensure that the target

funders have realized the true nature and impact of the project. One of the strategies that will

guarantee project buy-in by the funders is to ensure that each of the target members can visualize

how their contribution will make a positive impact. Thus linking the project to an issue that the

target community feels is relevant to their wellbeing or promotes the wellbeing of the society is

one strategy that will guarantee adequate funders. In the current case, Genusee selected a project

they knew was a major concern for the society, environmental protection. The nature of the

delivered the message was additionally vital to ensuring member buy-in since it depicted the

project as a community betterment initiative that is going to solve the endemic challenge posed

by plastic pollution.

Further, making each contributor feel appreciated is the other means used to advance the

success in attracting funders. Genusee realizing this made sure that each donor, irrespective of

their contribution were honored by either receiving a reward or having their name engraved in

history. Overall, it is clear that the success of any reward based crowdfunding project is funded

on the relevance it has on the target members.

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References

Agrawal, A., Catalina, C., and Goldfarb, A., 2014. Some simple economics of crowdfunding.

Innovation Policy and the Economy, 14(1), pp.63-97.

Ahlers, G.K., Cumming, D., Günther, C. and Schweizer, D., 2015. Signaling in equity

crowdfunding. Entrepreneurship Theory and Practice, 39(4), pp.955-980.

Belleflamme, P., Lambert, T. and Schwienbacher, A., 2014. Crowdfunding: Tapping the right

crowd. Journal of business venturing, 29(5), pp.585-609.

Blundell, R., Lockett, N. and Wang, C., 2017. Exploring entrepreneurship. Sage.

Chan, C.R., Park, H.D., Patel, P. and Gomulya, D., 2018. Reward-based crowdfunding success:

decomposition of the project, product category, entrepreneur, and location effects.

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Ebben, J. and Johnson, A., 2006. Bootstrapping in small firms: An empirical analysis of change

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https://www.kickstarter.com/projects/genusee/genusee-eyewear-made-in-flint-from-

recycled-water on 3 January 2019

Giudici, G., Guerini, M., and Rossi-Lamastra, C., 2018. Reward-based crowdfunding of

entrepreneurial projects: the effect of local altruism and localized social capital on

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Halt, G.B., Donch, J.C., Stiles, A.R. and Fesnak, R., 2017. Intellectual property and financing

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Harrison, R., 2013. Crowdfunding and the revitalization of the early stage risk capital market:

catalyst or chimera?.
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Hörisch, J., 2015. Crowdfunding for environmental ventures: an empirical analysis of the

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Mollick, E., 2014. The dynamics of crowdfunding: An exploratory study. Journal of business

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Timmons, J.A. and Spinelli, S., 1994. New venture creation: Entrepreneurship for the 21st

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