In the past couple of weeks, we discussed how crowdfunding was an up and coming way to spur sustainability projects. Today I discuss the results of a research project co-authored with Professor Yulia Titova at IESEG School of Management building on the Master thesis of my student Jade Tissier. We had unique access to the KissKissBankBank (KKBB) crowdfunding platform and created a database using this information. Founded in September 2009, KKBB is the first and largest crowdfunding platform in Europe. Although it is Europe-based, projects are spread across 174 countries making it a truly global platform.
Any person with an innovative or creative idea can present their project to the platform free of charge. It then goes through a screening process by KKBB. KKBB lets project creators categorize their projects within one of the following categories: Music, Movies, Live performance, Arts, Sports and Expeditions, Food, Print, Fashion, Web and Tech, Photography, Education, Design and Innovation, Media, Event, Games, Local authorities, and finally the two categories we define as sustainability-oriented: Solidarity and Green projects. A large percentage of projects presented are culturally oriented, whereas sustainability oriented-projects account for 13% of all projects. We examined projects from 2010-016, with a final dataset including 22,404 project observations.
What do our results say? Does sustainability please the crowd? Indeed, it does. Crowdfunders choose to support sustainable projects above all other types of projects. This first finding clearly supports previous research that investors are motivated by both financial and non-financial returns. Indeed, the crowdfunders we looked at not only do not require monetary compensation but further, are keen to select projects based on their sustainability components. The immaterial utility gained such as happiness and satisfaction of making a difference in this world can be shown to matter to today’s young, generally wealthy investors.
However, we uncovered that this is particularly relevant for social sustainability projects rather than environmental sustainability projects. It appears that the urgency of the projects can partially explain this, wherein we find that social sustainability projects are perceived by the crowd to be more urgent than environmental projects (and other non-sustainability projects on average) and thus attract more money from investors.
Indeed, with the increasing amount of awareness campaigns on the precarious situation in which we find ourselves in today, it seems that crowdfunding campaigns have not only become shorter over time; but that people are more willing to fund campaigns that appear more urgent. This is a very interesting and keen observation. Whereas some forms of Social or Responsible Investment appeal to longer term investors and want to go against the short-term mentality of financial markets, crowdfunding appeals to investors who want to make a direct and tangible impact on an urgent, usually social problem. Further, due to the fact that there are a myriad of problems and issues that need to be solved, agents simplify their selection process by funding those that appear to be in most need of funding first.
We also find that whereas the quality of the campaign measured by the presence or absence of a video has no real effect on the probability of funding, whether direct or indirect, the information provided measured by the length of the description moderates the attractiveness of the more urgent social sustainability campaigns. This quality measure can be interpreted as the availability of information. That is, if a campaign is social, likely perceived as urgent, but provides less information, then it is more likely to attract less funding than if it provides more information. These results are indeed intuitive and illustrate how agents, regardless of preferences for philanthropic action nevertheless take into account rational considerations in making decisions. This highlights a very strong case for crowdfunding as a phenomenon: Projects must be both urgent and provide information for it to be successful, because people care about the impact of their money.
Our study is a first foray into this domain and there is much more to explore for future research. First is the categorization of projects. What we label as sustainability projects are based on the campaigners’ self-selection of categorizing their project as either solidarity or green projects. This does not mean that projects in other categories are simply not sustainable. However, it does appear that campaigners prefer not to position them as such. More research needs to be done to categorize which projects are sustainable or, even better, to have an index or level of sustainability to add more variation to the data. Further improvements must also be done for a better operationalization of quality. We must be able to clearly distinguish a good project from another in a better, more systematic way.
Most important is the fact that we do not know what happens after the fundraising campaign. Success cannot merely be conceptualized as a fundraising activity — albeit being the focus of our paper and nevertheless a big first step. Rather, we must be able to assess the social impact of crowdfunded projects after they have been funded to understand whether our money truly does what we, as a crowd, dream for it to do: change the world.
“One person can make a difference, and everyone should try.” — John F. Kennedy n
Note: References are available upon request.
Daniela “Danie” Luz Laurel is a business journalist and anchor-producer of BusinessWorld Live on One News, formerly Bloomberg TV Philippines. Prior to this, she was a permanent professor of Finance at IÉSEG School of Management in Paris and maintains teaching affiliations at IÉSEG and the Ateneo School of Government. She has also worked as an investment banker in The Netherlands. Ms. Laurel holds a Ph.D. in Management Engineering with concentrations in Finance and Accounting from the Politecnico di Milano in Italy and an MBA from the Universidad Carlos III de Madrid.