10 th Global Business Conference February 13, 2016 Page 1 Determinants of Crowdfunding Success: A Multi-case Study of Philippine-Based Projects Raymond Allan G. Vergara Assistant Professor, Marketing and Advertising Department, Ramon V. Del Rosario College of Business, De La Salle University Manila raymond.vergara@dlsu.edu.ph Abstract: Crowdfunding, an alternative means of raising funds for a business venture or social cause through online platforms, is a multi-billion dollar global industry expected to surpass the size of the global venture capital industry. In the Philippines, however, it is still in its early stages of growth. Despite its low popularity, several projects have been completed successfully, some of which eventually progressed into viable business startups. Using the pattern-matching technique of Robert Yin's multi-case study approach, this paper offers an explanation of what influences a crowdfunding project's success. Drawing on five cases of completed crowdfunding projects in the Philippines, analyzed using Ethan Mollick's crowdfunding success model, this paper suggests that social networks, funding targets, funding duration, platform endorsement and underlying project quality are closely associated with project success in the Philippine context. Key words: Crowdfunding; Funding; Small Enterprises INTRODUCTION Crowdfunding, a fundraising vehicle that uses the resources of the public or the “crowd,” has recently gained traction among entrepreneurs as an alternative funding source to start up a project or business venture. Popular in North America and Europe, crowdfunding is rapidly gaining ground in Asia. In crowdfunding, a project owner initiates a campaign on a crowdfunding platform or website. The owner, also known as the “fund seeker,” elicits support for the project from the public, or the “crowd.” Those who pledge financial support are called “backers.” These backers, in turn, receive something in exchange for their support, called a “reward.” A project’s rewards system involves pre-determined reward tiers, as backers will pledge different amounts. Fundraising for projects have a limited run, typically a few weeks depending on the platform’s policy. Benefits of Crowdfunding Crowdfunding provides financially marginalized organizations access to alternative funding. These organizations, such as startup businesses, social enterprises and non-profit organizations (NPOs) face limited funding resources and, therefore, find financial sustainability a challenge (Cosh, Cumming, & Hughes, 2009; Lehner, 2013; Sontag-Padilla, Staplefoote & Gonzales-Morganti, 2012). Furthermore, crowdfunding can serve as an alternative marketing tool, which further benefits startups, small firms and NPOs, which do not have extensive marketing budgets to promote their products or conduct market research. Belleflame, Lambert and Schwienbacher (2014) contend that project owners use a crowdfunding campaign to launch a new product, gain market and consumer insights, or create a consumer-developed product. Types of Crowdfunding Crowdfunding projects differ in scope, type and scale (Mollick, 2014). A survey of the popular crowdfunding site, Kickstarter, reveal different project category types, from the artistic (involving crafts, photography, dance, music and film, among others) to fashion (clothing lines, jewelry) to technology. Some projects can be funded for as little as a few hundred dollars to as much as a few million dollars. There are also three general types of crowdfunding models: donation model, reward model and equity model, defined by how differently the “rewards” are gi ven to backers (BALLE, 2012). In the reward model, “supporters make a monetary contribution in return for a reward of some sort.” This reward can be intangible, such as “being identified publicly as a supporter” or tangible, such as a shirt or the product that the company is seeking funding for. Kickstarter and Indiegogo are the largest and most popular rewards-based crowdfunding platforms. In the donation model, “campaigns gather hundreds of small donations to achieve a financing goal.” GoFundMe and GoGetFunding follow the donation model. In the equity model, “investors receive an interest in the profits of the business that they are helping fund.” Fundable and CircleUp are examples of platforms that follow the equity model. Massolution, however, acknowledges three other types of crowdfunding models: lending, hybrid and royalty-based models (Crowdsourcing.org, 2015). Platforms also differ in funding models. In general, there are three types: fixed funding, flexible funding and subscription funding. Fixed funding is also known as an all-or-nothing funding, wherein a project owner will only receive the entire crowdfunded amount if he reaches or exceeds his funding goal. Flexible funding, or a keep- what-you-raise funding, allows the project owner to keep whatever he raises, even if he is unable to achieve his funding goal. In some crowdfunding sites, a project owner should achieve a set percentage of the goal before he is allowed to collect funding. Lastly, in subscription funding, “supporters can subscribe to a campaign for a monthly fee and receive monthly perks in exchange.” (Holm, 2013)