Determinants of overfunding in reward-based crowdfunding

Pinkow, Felix Article — Published Version Determinants of overfunding in reward-based crowdfunding Electronic Commerce Research Provided in Cooperation with: Springer Nature Suggested Citation: Pinkow, Felix (2023) : Determinants of overfunding in reward-based crowdfunding, Electronic Commerce Research, ISSN 1572-9362, Springer US, New York, NY, pp. 1-38, https://doi.org/10.1007/s10660-023-09681-w This Version is available at: https://hdl.handle.net/10419/309815 Standard-Nutzungsbedingungen: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen. 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If the documents have been made available under an Open Content Licence (especially Creative Commons Licences), you may exercise further usage rights as specified in the indicated licence. https://creativecommons.org/licenses/by/4.0/ Vol.:(0123456789) Electronic Commerce Research https://doi.org/10.1007/s10660-023-09681-w 1 3 Determinants ofoverfunding inreward‑based crowdfunding FelixPinkow1 Accepted: 31 January 2023 © The Author(s) 2023 Abstract While research on factors contributing to the success of a reward-based crowdfunding project is abundant, research dedicated to projects that were not only successful, but received significantly more funds than initially targeted—overfunded projects— is still scarce. Following a qualitative case-study approach, this study sought to shed light on this phenomenon through examining expert interviews with supporters and team members of an overfunded crowdfunding project considered a critical case. The results are divided into three phases that differentiate characteristics ascribed to the crowd, the project, and the communication. The main findings highlight the central role of the project founders’ reputation and experience, that a positive sentiment among the crowd towards the project must be encouraged and maintained and that the core target group must be correctly identified and attracted. This core target group is crucial for attracting a broader audience, a mechanism that is supported if the project benefits from network effects. A narrative of the project as a vision or ‘dream’ of the project founders thereby contributes to creating a hype and ‘social buzz’. Ultimately, this study contributes to reward-based crowdfunding literature through offering novel insights on project overfunding and illustrating possibilities for new and small ventures how to attract and maintain customers through rewardbased crowdfunding. Keywords Reward-based crowdfunding· Overfunding· Success factors· Framework· Entrepreneurial finance· Business venturing * Felix Pinkow felix.pink[email protected] 1 Technology andInnovation Management, Technische Universität Berlin, Straße des 17. Juni 135, 10623Berlin, Germany F.Pinkow 1 3 1 Introduction For entrepreneurs, the financing stage of their venture is one of the most critical and decisive for the future of their business idea. Venture capital or bank loans have long been the traditional ways to receive the necessary monetary resources for founders requiring rather large amounts of funding [68]. However, during the last decade reward-based crowdfunding emerged as an alternative for founders [68, 75]. By asking potential customers for financial resources, entrepreneurs can raise the necessary funding for their idea, and in reward-based crowdfunding even without the obligation to repay the funding or lose ownership. Crowdfunding mitigates the difficult endeavor of new ventures to convince professional investors to attract external financing [10]. Since popular reward-based crowdfunding-platforms like Indiegogo and Kickstarter launched, the total volume of transactions through crowdfunding increased continuously. A vast majority of campaigns hereby receive the targeted amount of funding by small amounts [56], however, some crowdfunding initiatives raise funds way beyond their initially targeted goal and receive the double, threefold, or tenfold and beyond amount of the requested funding [e.g., 19, 34]. These overfunded (sometimes overfinanced) crowdfunding projects are largely neglected in extant literature, as a vast majority of studies focus on the general distinction between successful and unsuccessful crowdfunding [20, e.g., 56, 76, 79]. However, especially overfunded projects can receive up to several million dollars and thereby compete with funding amounts usually provided by venture capitalists. The importance to offer explanations for overfunding relates to the long-term survival of crowdfunded new ventures. For entrepreneurs, a crowdfunding campaign is often a first point of contact between the founders and the crowd as potential customers [9], and successful campaigns can provide a signal of quality and market acceptance for additional funding stages, such as venture capital funding, subsequent to crowdfunding [41, 48, 73]. Overfunded projects may thereby indicate that the idea of the crowdfunding project is perceived as an outstanding idea or product by the potential customer base and thus can provide a strong indication that the idea can become highly successful after the crowdfunding campaign. Thus, overfunding serves not only the purpose of signaling a promising project idea to potential future investors, which can benefit future fundings rounds. Overfunding can also enable entrepreneurs to acquire a larger customer base already during the early funding stages, holding the potential to accelerate the adoption of a product idea upon market launch. Therefore, knowledge on which type of crowdfunding projects, which marketing actions, or which product features contribute to the likelihood of receiving more funds than requested can be highly beneficial for project teams when designing and managing a reward-based crowdfunding campaign. A better understanding of project overfunding can be useful to derive crucial advice for entrepreneurs in terms of which actions and characteristics of a project can not only motivate the crowd to provide funds to succeed, but to continue funding upon reaching the initial funding goal. Yet, extant literature does not offer sufficient empirical evidence to explain the emergence of overfunding. 1 3 Determinants ofoverfunding inreward-based crowdfunding Addressing this gap in literature, this study examines project overfunding and seeks to identify characteristics of overfunded reward-based crowdfunding projects and potential interrelationships among the characteristics. The central research question addressed in this study is as follows: What are the characteristics and determinants of overfunded reward-based crowdfunding projects? Thereby, this study contributes to the understanding which projects might be prone to become overfunded, and which factors beyond the factors contributing to project success play a role for backers’ intention to overfund a project. Building on reward-based crowdfunding literature and in particular the few studies concerned with project overfunding, this study offers unique insights into the mechanisms that contributed to the success of ‘Star Citizen’, one of the highest overfunded projects to date. From a theoretical perspective, the results of this study offer empirical evidence to what extent the factors that explain crowdfunding success can be adapted to the context of project overfunding, and which additional factors motivate a crowd to overfund a project. 2 Literature review Reward-based crowdfunding can be defined as “an open call, mostly through the internet, for the provision of financial resources either in the form of donations or in exchange for the future product or some form of reward to support initiatives for specific purposes” [10, p.588]. Contrasting to other types of crowdfunding, such as investmentor equity-based, this study is concerned with reward-based crowdfunding, such that backers typically receive non-monetary rewards for providing funding [67]. The central topic within extant research addressing reward-based crowdfunding relates to factors explaining whether a project achieves its set funding goal or not, or in other words successful and unsuccessful projects. Since overfunding constitutes a special case of successful projects, the vast majority of literature related to reward-based crowdfunding success cannot be adequately used to derive implications for overfunding. Only few studies directly address project overfunding empirically, which are summarized in Table1. The dominating approach to research project overfunding has been to assess whether the central and basic factors that impact project success [e.g., 8, 19, 21, 36, 56, 64, 77] also impact project overfunding [2, 19, 44, 52, 63]. These factors include the availability of pictures and/or videos on the crowdfunding project’s website, the number of comments and updates, the level of the funding goal, the size of the project team’s network in terms of friends or size of online networks, and whether members of the founding project team themselves have supported other crowdfunding projects in the past. While literature on project overfunding provides a tendency that these factors may not only impact project success, but also the likelihood of overfunding [2, 19, 44, 52], there is also evidence that these factors do not significantly contribute to explain the emergence of overfunding [44, 63]. Hence, extant literature offers ambiguous results. Beyond the aforementioned factors, two further studies relate the perceived attractiveness of a crowdfunding project’s idea to the willingness of backers to provide funding beyond the initially set funding goal. Crosetto and Regner [21] find that when projects offer backers to pre-order the envisaged product through a crowdfunding campaign, the F.Pinkow 1 3 Table 1 Literature on Overfunding in Reward-based Crowdfunding Factors Literature Description Effect Pictures, videos, comments, updates, funding goal, friends/network, support of other crowdfunding projects [2, 19, 44, 52, 63] • Considered the fundamental factors contributing to project success • Mixed findings showing evidence of both a positive relationship with project overfunding, or no effect at all • Mixed Product attractiveness [21] • Pre-orders motivate the crowd to provide financial resources independent of whether the project’s funding goal has been achieved already • Positive [84] • Desire to ‘make the product happen’ offers stronger motivation to provide financial resources than supporting a project to achieve its funding goal, whereby increased funding is believed to contribute to the successful realization and implementation of the project’s idea • Positive 1 3 Determinants ofoverfunding inreward-based crowdfunding motivation to provide financial resources is rather focused on the attractiveness of the product, than on the willingness to support a project to achieve its funding goal. This finding is closely related to an individual’s desire to ‘make a product happen’ [84]. When individuals from the crowd perceive a strong desire to support a project with the goal to increase the possibility that the project idea will be ultimately successfully implemented and realized, this desire results in a motivation to support a crowdfunding project even beyond its funding goal [84]. Apart from the literature on project overfunding in reward-based crowdfunding, some empirical findings on project success offer opportunities to derive theoretical relationships to project overfunding. A central role for crowdfunding success is ascribed to community-related factors, such as the social media and the personal networks of project founders. Communities offer a way for interaction between the crowd and the project team, can serve to create trust and credibility, or to raise awareness of a project [24, 33, 37, 74] Gerber etal. [28] find that a motivation for backers to pledge is to engage in a community, to connect with others, and to be associated with the project. In a community context, offering rewards which provide social reputation to backers and allow them to demonstrate their support publicly increases the chance to succeed [18]. From the community perspective, overfunded projects can offer a greater incentive to be part of a larger community, as overfunded projects are typically supported by a higher number of supporters [2]. Thus, literature offers an indication that with a growing supporter base, further individuals from the crowd may be motivated to join this supporter base due to the opportunity to connect and be a part of a community. A further central topic in crowdfunding research is concerned with linguistic attributes and the narrative framing of a project [e.g., 4, 6, 54]. In particular the framing of a project offers promising avenues to connect extant literature on project success with project overfunding. For instance, framing a project description in a way that resonates with the values of the crowd positively relates to the crowd’s funding intention [59]. Supporting these findings, Kim et al. [43] state that the narrative of a project idea serves to create trust and credibility, which can support attracting supporters to provide funding. The way a project is framed and communicated hence can motivate the crowd to support a project, and allows to assess, for instance, business viability, which positively contributes to funding intention [35]. These studies are, however, limited in their focus addressing the likelihood of success of crowdfunding projects, factoring out the potential relationship to subsequent overfunding upon project success. One study observing the narrative framing of an overfunded project finds that portraying the idea as a personal dream of the founding team is positively related to overfunding [3]. Yet, for the remaining factors, as outlined above, empirical evidence for a relationship to project overfunding is lacking. The shortcomings of extant literature on overfunding are evident considering that the factors that have been primarily addressed serve to provide the crowd the basic information on crowdfunding projects. Mollick [56], for instance, states that providing updates, pictures, or videos signal a basic preparedness of the project team to the crowd. Thus, it is questionable whether these factors truly discriminate between successful but not overfunded, and overfunded projects. To conclude, studies explicitly dedicated to project overfunding remain scarce and offer ambiguous results. F.Pinkow 1 3 Only a small fraction of the factors that have been assessed for project success have been equally assessed in the context of project overfunding. Moreover, interrelationships between factors that bear potential to explain project overfunding have been largely neglected, as most empirical approaches are limited to a selected set of factors. Against this backdrop, most of the factors addressed in extant literature relate to actions from the project team, such as providing updates. Much less research is available that sheds light on the crowd, resulting in a knowledge gap with respect to individual characteristics of the crowd who supports and overfunds a crowdfunding project, and their subjective motivation to provide financial resources beyond the funding goal. Hence, this study seeks to offer novel insights into the emergence of project overfunding. A special focus is set on developing an understanding on what characterizes the crowd of overfunded projects, and the factors that motivate the crowd to overfund a reward-based crowdfunding project. This further includes the subjective perceptions of the crow towards overfunded projects and how different factors relate to each other. 3 Methodology anddata 3.1 Research design The phenomenon of overfunding constitutes a special case of successful projects and thus factors differentiating successful from unsuccessful projects should not be equally used to make statements on overfunding, since they were not explicitly elaborated to explain overfunded projects. According to Glaser and Strauss [31, p. 37], using findings from a related field of research “tends to hinder the generation of new [concepts], because the major effort is not generation, but data selection.” Therefore, there is very limited empirical evidence available on overfunding, and which factors contribute to overfunding, as outlined in the literature review. Moreover, the little evidence available shows that the subjective perception of project attractiveness may play a central role in the context of project overfunding. Therefore, a qualitative case-study approach was chosen, since the research question of interest cannot be adequately explained by existing research [25], and as quantitative research lacks the potential to properly assess characteristics which are not quantitative by nature, such as “the idea itself, the initiators reputation, and notoriety” [38, p. 18]. In this regard, the Grounded Theory approach allows “to let the key issues emerge rather than to force them into preconceived categories” [15], and constitutes an appropriate qualitative, exploratory method to research the yet unexplored characteristics of overfunding. However, existing research on crowdfunding contributed to the purpose of this study as a starting point. Glaser and Strauss [31] state that researching the underlying structure of a study’s object provides a foothold for the research, but one should not assume any relevancy to the conducted research. Therefore, no hypotheses or propositions were preconceived based on prior research [15, p. 47]. A downside described by Suddaby [72, p. 635] is that prior knowledge of existing findings has the potential to “force the researcher into testing hypotheses, either overtly or unconsciously, rather than directly observing.” A prevention measure is to focus 1 3 Determinants ofoverfunding inreward-based crowdfunding not “too closely to a single substantive area and, instead, draw from the several substantive areas that are frequently [observed]” [72, p. 635]. Following this logic, the provided literature overview constituted a very broad, theoretical basis for this study. As such, the three main constituents within the crowdfunding environment, the project founders and the project idea, the crowd, and the communication and interaction between them, were the central objects of interest in this study. 3.2 Data collection andexamination 3.2.1 Case description Considered a best-case example, the highest overfunded reward-based crowdfunding project in history to date, the video game Star Citizen, was the central crowdfunding project assessed in this study. The goal of Star Citizen’s project team was to create an immersive video game set in space striving to become the best space simulation game in the market. The project launched in October 2012 with an initial goal of $500,000 and received $2.1 million from around 34,000 supporters after a one-month campaign on Kickstarter. The project founders offered a range of rewards during their Kickstarter campaign, such as providing early access to the game once it is in a playable state, offering unique in-game content varying contingent on the amount of money provided, or spending a day with the project founders. However, the founding team of Star Citizen under the leadership of Chris Roberts continued crowdfunding through their own website, receiving more than $440million as of March 2022 from more than 3.5million backers1. Thereby, Star Citizen’s team exploited the crowdfunding mechanism over several years to receive further funding. Goffin etal. [32] emphasize the importance of carefully choosing cases for appropriate theoretical reasons, which is particularly important for single-case studies. The rationale of assessing Star Citizen as a best-case example is the possibility to view this project from a dynamic perspective, as characteristics before, during and after the crowdfunding campaign on Kickstarter can be assessed. After the campaign on Kickstarter ended in November 2012, Star Citizen continued to offer new rewards that extend the final product, the video game Star Citizen, in case a newly set funding goal is reached. This project is in particular promising for the identification of factors that impact overfunding, since it managed to achieve and exceed the numerous new and steadily increasing funding goals over the course of several years. From a methodological perspective, the method of critical case sampling serves as a basis for the selection of Star Citizen, which according to Patton [61, p. 174] follows the logic that “if it happens there, it will happen anywhere.” Thereby, “logical generalizations can often be made from the weight of evidence produced in studying a single, critical case” [61]. Accordingly, also Yin [78, p. 175] argues that extreme and unusual cases, such as Star Citizen in the context of crowdfunding in this study, are suitable for single-case studies. 1 https:// rober tsspa ceind ustri es. com/ fundi nggoals. F.Pinkow 1 3 3.2.2 Data collection The data was primarily collected through in-depth interviews conducted via Skype in July and August 2018 with experts having sufficient and extensive knowledge of Star Citizen’s crowdfunding campaign. The main criteria to identify relevant interview partners was that they were actively engaged with Star Citizen, meaning that at the time of the interviews they have been aware of the Kickstarter crowdfunding campaign and since actively followed recent news related to the project. Experts in this field were represented by individuals who provided funding themselves, and as such the interview partners were backers of Star Citizen’s crowdfunding project with in-depth knowledge about the project. Especially these experts are “people who have directly experienced the phenomenon of interest; that is they have ‘lived experience’ as opposed to secondhand experience” [62, p. 104], and as such were considered high-quality interviewees. For identifying potential interview partners, gatekeepers have been contacted, and once the first interviewee who supported the project during the early stages was interviewed, the personal network of this interviewee was subsequently used to identify further potential interviewees through snowball sampling. At the beginning of the interviews, the purpose was clearly stated and permission for recording and evaluating the interviews for research purposes has been provided. In total, six expert interviews with backers of Star Citizen were conducted. Five of the six interviewed experts joined in the very early phases of the Kickstarter campaign or shortly after and were therefore considered early backers. One interviewee supported the project three years after the ending of the Kickstarter campaign of Star Citizen, in 2015. All interviewees were still active in following the project from the time of their first pledge to the time of the interviews, and confirmed their strong engagement in the project. Thus, they were able to recall experiences and information on the crowdfunding campaign from its initial launch until the time of the interviews. The questions throughout the interview did not explicitly ask for individual success factors that have been subject to previous research on crowdfunding success, but following the notion of the grounded theory, the interviews primarily aimed at letting the key factors contributing to overfunding emerge through the thoughts and perceptions of the interviewees. The general topics include an introduction on major factors that contributed to the overfunding of the assessed project, followed by more specific topics on the project idea and team, characteristics of the crowd, and the interaction and communication between the project team and the crowd. The interviewees were asked to provide insights why the project became so successful and overfunded according to their opinion. The questionnaire did thus not ask for the specific individual and personal motivation of these backers but asked them to recall experiences on Star Citizen’s crowdfunding campaign from a more general perspective, such that the interviewees acted as experts in this subject. Additional insights from the perspective for the project team were provided by a face-to-face interview with two CIG team members in 2018. A partial, smooth verbatim transcription of the data material was applied. To deepen the insights of the textual data generated through the interviews, additional secondary data was examined that served to triangulate the collected interview 1 3 Determinants ofoverfunding inreward-based crowdfunding most valuable feedback, and combined this with restricted access to feedback programs by setting a minimum contribution level to gain access to them as incentive for the crowd to provide higher amounts of funding. The data analysis showed that particularly crowd members with very strong engagement were eager to be part of this feedback program and incentivized them to provide additional funding. This can be considered an additional form of non-monetary reward, which does not take the form of a pre-order but a special treatment of a group of backers having a high willingness and personal interest to support the project, coupled with a price discrimination mechanism for this kind of reward. This allowed the project team to receive feedback from backers that are strongly engaged in the project through relatively high financial contributions and incentivized funding intention at the same time. Finding 5 Providing structured feedback programs for highly engaged supporters increases the quality of received feedback and motivates these supporters to contribute further ideas to the project. Restricting access to these feedback programs by setting minimum funding amounts contributes to the willingness of the core target group to provide a higher amount of funding. 4.3 Post‑campaign As the project became overfunded after the initial crowdfunding campaign, the project founders provided stretch goals so backers could continue to provide funding. In Star Citizen’s case the stretch goals were partially determined by the crowd itself through the aforementioned feedback programs, serving as a means to identify the needs of the crowd. The crowd suggested goals according to their own needs, thereby further increasing their own wish for the realization of the project [in line with 84]. These results indicate a high importance of maintaining crowd involvement for funding in the long-term, which was further encouraged through active communication, for example demanding and incorporating crowd feedback or providing behind-the-scenes insights. These findings underline that backers want to support products which are closely oriented towards their imagination of the final product. Thereby, in line with extant research this study finds that fostering an environment where the crowd feels involved in creating the “things they want to experience” induces satisfaction with the final product [17]. As identified through the interviews, incorporating such feedback may lead to continuous funding by individuals, which means individual backers support the project regularly with new contributions. To utilize this, Star Citizen’s team offered special, limited rewards to the crowd which allowed backers to publicly demonstrate their supporting behavior and that they helped to realize the project. Thereby, extending studies on price discrimination in reward-based crowdfunding [e.g., 16, 65] to the context of project overfunding, the project founders used crowdfunding as price-discrimination device by offering different rewards (e.g., access to certain feedback programs, and special limited rewards) appealing to backers with both a high and a low willingness to pay. F.Pinkow 1 3 Finding 6 Incorporating crowd feedback maintains active involvement of existing project supporters, increasing the likelihood for continuous funding by individual crowd members. Finding 7 Offering limited rewards or special edition rewards maintains the active involvement of existing supporters, increasing the likelihood for continuous funding by individual crowd members. This effect is strengthened if the rewards allow the supporters to publicly demonstrate their individual support and/or if the rewards originate from crowd feedback. Ultimately, the broader audience beyond the core target group can be attracted in several ways. As identified in this study, the broader audience was attracted in the case of Star Citizen by the hype the project generated, such that the project was covered in news articles and general media. Moreover, as the project was steadily extended by new features, partly originating from the feedback provided by the existing supporters, these new features aim to address the needs of the broader audience. This enabled the project team to secure funding in the long-term through financial contributions by both new and existing backers. This result supports Stanko and Henard [70] who point out that backers can be considered innovation adopters who spread the word of mouth and raise awareness of a project. When these backers successfully promote the project within their network, they attract further potential customer, and as such stimulate further funding. The crowdfunding campaign can therefore be seen as a catalyst to successfully pass the initial stages of raising awareness for a new product. In line with Lehner etal. [47], this group of people–the core target group–is not only characterized by high efforts of pledging, but also by providing valuable feedback and the willingness to provide solutions for emerging problems. Thereby, the project team benefits from implementing this feedback into the product in the long term, which ultimately reduces the risk of failing to meet customers’ expectations [51]. Finding 8 The core target group spreading word-of-mouth and creating ‘social buzz’ and the project team demanding and incorporating feedback and thus implementing new features into the product contribute to attract a broader audience in the long-term. However, implementing feedback means additional content and product features, which leads to increased development efforts. Thereby, in line with previous research, one of the most critical aspects for overfunded projects are delays in the product development [26, 56]. This study provides potential reasons and consequences for delays of overfunded projects: the numerous announced features prolonged the development, which ultimately led to a deterrence of both existing and new supporters and a negative crowd perception of the project management. Moreover, regularly adding features during the product development render a consistent and stable project planning near impossible. According toSalomo etal. [66] project risk planning and goal stability both positively contribute to the performance of an innovation. In a crowdfunding setting, their findings link to the presented results considering that continuously changing product features and adding 1 3 Determinants ofoverfunding inreward-based crowdfunding (stretch-)goals as means to stimulate overfunding may ultimately decrease the performance of the final product. Finding 9 Implementing new features leads to increased development time and decreased goal stability of the project, resulting in a negative perception by the crowd and thus negatively impacts acquiring additional funding. 4.4 Project overfunding inreward‑based crowdfunding Table4 summarizes the presented findings and illustrates their interrelations, as presented above, along the dynamic perspective of three distinct phases—pre-crowdfunding campaign, the crowdfunding campaign on a given platform, and the phases after the crowdfunding campaign on the platform ended. It is noteworthy that the project before and during the Kickstarter campaign was strongly characterized by positive aspects. This indicates that overfunding, as a result, was strongly related to a highly positive sentiment among the crowd in the early stages of the campaign, which boosted funding, encouraged sharing the project in the crowd’s network, and provided an optimal starting point for continuous crowdfunding in the long-term. The negative aspects were ascribed to the later stages of the project and thereby indicate important potential outcomes of overfunding: a delay in product delivery and the crowd’s perception that too many features were added. 5 Discussion The factors impacting project success in reward-based crowdfunding are central to crowdfunding research. However, overfunded projects that are not only successful but receive significantly more funding above the initially set funding goal have been largely neglected. Therefore, this study sought to provide insights into overfunding of reward-based crowdfunding projects through a qualitative case-study. The findings are structured along three phases, that are prior to the launch of a crowdfunding campaign, the campaign on a dedicated crowdfunding platform (e.g., Kickstarter), and the phase after the campaign ended on the platform. The most important characteristics center around the main constituents in a crowdfunding context, that are the project (including the project idea and the project team), the crowd, and the communication between the project team and the crowd. 5.1 Theoretical implications Relating to literature on project overfunding [e.g., 2, 44, 63], the findings of this study do not indicate that the studied crowd was substantially concerned with common success factors like the number of updates, or the availability of pictures. Rather, the findings suggest that more importance was attributed to subjective experiences of a crowdfunding campaign that contribute to the willingness to provide F.Pinkow 1 3 Table 4 Interrelation of findings during different crowdfunding phases Stage Crowd Project Interaction and Communication Pre-crowdfunding campaign • Interest / activity in the field where the project founder(s) are located (+) • Past success / experience with related projects / products (+) • Crowd is already familiar with past projects / products of the project team (+) • Unsatisfied wish / need (+) • Project team correctly identifies the need (+) • Recall nostalgia (if applicable) through announcing the project (+) Crowdfunding campaign on platform (for example Kickstarter) • Positive sentiment towards vision of project team and sharing / adapting the vision (+) • Perceive euphoria / hype (+) • Project is a personal vision / dream (+) • Project is unique / differs from alternatives (+) • Team communicates the project as a vision / dream and encourages crowd to share that vision (+) • Create excitement, for example through previews of interesting features of the final product (+) • Offer limited sales of additional unique product features (+) • Spread word of mouth / recommend project to others (+) • Product allows interaction of users (+) • Provide incentives / rewards and encourage crowd to spread word of mouth (+) • Strong core target group / hardliners (+) • Financially strong / high willingness to pay (+) • Wish to be recognized as early supporter (+) • Self-determined price-discrimination (+) • Provide unique benefits to backers depending on pledge level, for example discounts, club membership (+) • Directly address core target group (+) 1 3 Determinants ofoverfunding inreward-based crowdfunding Table 4 (continued) Stage Crowd Project Interaction and Communication Post-crowdfunding campaign on platform (for example Kickstarter) • Willingness to share feedback and ideas (+) • Positive perception of incorporation of feedback (+) • Provide structures for feedback, implement system to filter out most useful feedback (+) • Team demands crowd feedback (+) • Crowd communicates most important feedback, for example by community voting on different suggestions (+) • Emerging urge to collect (+) • Perception of too many features added; perception of project team setting wrong priorities (-) • Add content / extend the project (+) • Regular provision of updates and news, announcements during live-shows, for example events or streams (+) • Introduction of new technologies attracts broader audience (+) • Adapt to new technologies (+) • Communicate the increasing quality of the final product through new technologies (+) • Losing interest due to delays, potentially request refunds (-) • Delay due to increased expectations and promised stretch goals (-) • Transparent communication, provide reasons for delays and public product development schedule (+) • Worried about issues in the project team due to dismissed employees (-) • Restructure / expand team according to changing requirements (+ / -) • Closer to international backers through international expansion (+) • Provide behind-the-scenes insights for transparency (+) • - • Encourage a shared perception of the team’s vision among growing project team (+) • Avoid negative news about internal discrepancies (+) • Organize themselves in groups, create community-events (+) - • Support crowd behavior, for example by participating / visiting the communityevents (+) (+) positively perceived by the crowd / positive effect on funding (−) negatively perceived by the crowd / negative effect on funding F.Pinkow 1 3 funding regardless of whether a project already achieved its funding goal, or in other words, to overfund a project. For instance, projects that aim at satisfying a strong need of the crowd, framing the project as a dream, and perceiving a hype among the crowd related to project were central topics that emerged in this study. As such, this study complements and enhances literature on project overfunding, suggesting that primarily the crowd’s subjective perception of the project, including product features and the project team, is fundamental for project overfunding to occur. Table5 offers an overview of the central contributions to reward-based crowdfunding literature, and outlines discovered relationships among the factors bearing potential to contribute to project overfunding. In line with prior research, backers who are more involved in a project, compared to backers who provide funding with the primary intention to pre-order a product, are more likely to provide a higher amount of funding [71]. However, this study extends literature on the crowd’s funding behavior through the observation that individual backers may not only provide funding once during a crowdfunding campaign, but multiple times. In particular, backers who perceive that their contribution matters for a successful project implementation upon the crowdfunding campaign [84], perceive nostalgia [12, 29, 39], and perceive the project’s realization to some extent as a personal ‘dream’ [3] have been found to be willing to provide financial resources repeatedly over time. This continuous funding behavior was additionally complemented through three aspects. First, the introduction of attractive stretch-goal that promised novel rewards stimulated repeated funding intention. Moreover, the project team offered access to exclusive communication channels to exchange feedback and ideas about the project with backers above a relatively high individual funding threshold. And third, the core target group had sufficient financial resources to spend on the crowdfunding project, adding to literature on crowd characteristics [71]. The funding behavior concerned with repeated funding has not been subject to prior research, as a majority of literature focused on factors that increase the average contribution of backers [64, 71], but not repeated funding behavior over time. Thus, this study offers novel insights into the funding behavior of highly invested backers, and outlines which relationships to other factors can contribute to the intention of repeated funding. Moreover, this core target group is also more prone to spread word-of-mouth and thus contribute to raise awareness of a project within a broader audience. However, enhancing extant literature on the relationship between word-of-mouth and reward-based crowdfunding [11, 40, 46, 81], the findings of this study indicate that the existence of network effects are central drivers to spread word-of-mouth. In particular as the project was perceived as a personal ‘dream’ of the core target group, and the value of the project’s idea was depended on how many customers use the product, i.e., play the videogame upon release, this joint effect strongly contributed to the readiness to spread word-of-mouth and to a personal interest to attract as many additional backers as possible, from the perspective of existing and early backers of the project. In fact, successfully attracting the core target group, or category-centered community [36], may constitute a valuable signal since their participation in the project may elicit informational value for a broader audience. In particular, if people who are engaged and informed in the domain of the project support it with financial resources, their support can inform a broader audience who lacks the necessary knowledge concerning the quality of a project. Moreover, if the core 1 3 Determinants ofoverfunding inreward-based crowdfunding Table 5 Overview of contributions to extant reward-based crowdfunding literature and theory Topic Literature Extant Literature and Limitations Enhancement and Relationships Crowd Word-of-mouth [11, 40, 46, 81] • Major focus on the effect of word-of-mouth (WOM) on crowdfunding success • WOM can be stimulated by shares in social networks, the perceived quality of a crowdfunding project • Lack of comprehensive research on the sources that create the motivation to spread WOM • Motivation to spread WOM is driven by network effects (motivation for early backers to attract as many new backers as possible), and perceived euphoria or a ‘hype’ especially during the early funding period, which is linked to the perception of a strong desire (or a personal ‘dream’) to realize the project Funding behavior [64, 71] • Factors addressing the average contribution of backers, but no research on repeated funding behavior to date • Not only new backers can contribute additional funding, but existing backers can continuously and repeatedly provide funding • Repeated funding is encouraged through stretch goals and/or the introduction of exclusive rewards only to be received above a certain individual funding threshold, that allows to demonstrate one’s support within the crowdfunding community F.Pinkow 1 3 Table 5 (continued) Topic Literature Extant Literature and Limitations Enhancement and Relationships Crowd demographics and characteristics [71] • Core demographics are subject to prior research, but only limited evidence on how these demographics ultimately relate to the funding intention • Core target group not onlyhas high willingness to pay, but also sufficient available financial resources • Enables repeated funding and higher total funding amount, complemented through perception of nostalgia, strong euphoria/ hype related to the project Community [18, 27] • Wish to be part of a community, show own support within a community • Willingness to pay increases with community engagement, relationship to reward attractiveness and the ability to demonstrate one’s support of a project through showcasing exclusive rewards Project / project team Nostalgia [12, 29, 39] • Acknowledge the relevance of nostalgia, but limited explanations regarding the consequences of creating a nostalgic feeling among the crowd • Serves to attract core target group, create hype within the early crowd, stimulates spreading word of mouth to broader audience 1 3 Determinants ofoverfunding inreward-based crowdfunding Table 5 (continued) Topic Literature Extant Literature and Limitations Enhancement and Relationships Interaction and communi-cation Project narrative [3, 5, 6, 23, 49, 53, 57, 60] • Linguistic features are central to extant literature (e.g., positive wording, inclusive language, expressing charisma and passion, showing narcissism) • Narrative that resonates with backers’ beliefs and values contributes to funding intention and can stimulate enthusiasm among the crowd • Limited research on when such framing is credible and how the narrative relates to other factors • Complements crowd’s perception of nostalgia, and is more trustworthy if project team is already known/popular among core target group • Beyond contributing to project success, if the realization of a project is credibly framed as a ‘dream’ or ‘vision’ of the project founders, and this framing resonates with the crowd’s perception of a ‘dream’ for themselves, the willingness to provide increased funding enables overfunding Feedback and feedback programs [82, 83] • Possibility to provide feedback to project team contributes to crowd satisfaction and project engagement • Limited research on how to best implement feedback structures that offer high quality feedback to the project team • Discriminate backers contingent on funding amount, as core target group more likely to provide increased amount of funding and due to their high engagement they can offer high-quality feedback • Offer exclusive contact between project team and backers with high individual funding for feedback; resonates with perceiving the project as a ‘dream’ and the perception to have an impact on the dream’s implementation F.Pinkow 1 3 Table 5 (continued) Topic Literature Extant Literature and Limitations Enhancement and Relationships Reward attractiveness and stretch goals [1, 45, 50, 69, 71] • Central driver for funding intention is pre-ordering a product, implying sufficient attractiveness of pre-order as reward option • More attractive rewards tend to positively relate to project success, but mixed findings on quantitative shortage of attractive rewards • Most research on the number of different reward options and pricing strategies, but scarce research on subjective evaluation and importance of rewards and reward attractiveness from the crowd’s perspective • Attractive stretch goal rewards motivate individual backers to engage in repeated funding behavior • (Time-limited) Rewards that allow early backers or backers above a certain funding threshold to demonstrate their support for the project within a relevant community stimulates early funding and provide a higher amount of funding 1 3 Determinants ofoverfunding inreward-based crowdfunding Aggregated category 2nd -order theme Description and exemplary quotations Communication characteristics General communication Generally, the project team communicated that the project was oriented towards consumer needs, and that they tried to realize what they “believe the community [wanted]” (I7). Thereby, a fair treatment of the crowd was pronounced, that they “treat [the people] with the respect [they] deserve” (S3), which was generally positively perceived, as three interviewees indicated. Moreover, the interviewed team members emphasized a transparent communication and that their communication to the crowd “is primarily what [they] communicate internally” (I7). This led to a rather contradictory finding: the project team strongly perceived their communication as transparent and open, however, four interviewees stated that especially negative news was not communicated, only when “the rumor mill in the community blew up, so that they were forced” (I1) to communicate, but “they had a large veil around many points” (I3). A central issue mentioned in the interviews was perceived nostalgia among the crowd. The interviewed team members stated that Star Citizen would be an improved version of the games some supporters have played during their youth, and that this project will bring that experience back. These people were directly addressed by mentioning Chris Roberts’ previous games, and one interviewee pointed out that “this generation […], which he spoke to actively, they were the first […], initially pledging people” (I1). All interviewed early backers said they used to play similar games, and that this experience greatly contributed to their intention to support the project. But not only the nostalgia driven communication excited the crowd, the project team also actively tried to create excitement and to “keep [the game] engaging to be able to hit all facets of people” (I7). The excitement was for example created by providing “teasers concerning parts of the development” (I1), demonstrating future content which the crowd was looking forward to. Alternatively, Star Citizen also engaged famous actors as voice actors for in-game characters, which in turn contributed to both additional promotion by media and excitement among the crowd. Thereby, it was stated that “the own website [was] enormously important” (I1), and other social media platforms like Twitter and Facebook were perceived less important. Accordingly, Star Citizen organized and set-up their website in a way that was perceived as more attractive than other platforms and turned out to be a crucial aspect of the whole project. Communication activities A recurring topic was providing updates on the project and according to the interviewed project team, any kind of update, “even if it is not the information that [the crowd] is after, but that shows progress, will help keep them engaged” (I7). A structured approach to provide updates was the introduction of a roadmap, a tool to communicate the current development status to the community and to inform about upcoming content. In addition, a major communication activity was the organization of regular events, including live-streams or live-shows. Star Citizen’s project team organized live-streams which were broadcasted regularly and used to communicate upcoming sales, new content, the latest progress, and provided insights into the product development process. The project team answered community questions live during the streams, which was stated to be positively perceived and appreciated by the crowd. The project team also participated in main events of the gaming industry, for example GamesCom, and started their own annual event called CitizenCon. These events were used for big announcements and used as a tool to present milestones of the development. Ultimately, these events generally led to public attention, increased funding and provided an opportunity to boost the crowdfunding on a regular basis. Furthermore, the project team encouraged a sense of togetherness between them and the crowd, as one interviewee described that Chris Roberts was “encouraging people […] to become part of something what has never been before” (I2). The project team told the community to be part of the project and organized events where the community could decide on future content. For example, during live-shows the community could vote live on future content and thereby determined “the next [feature] that goes into production” (I7). The importance of being involved in the project was explicitly mentioned, since “to have a direct connection to the developer to some extent” (I3) and that “the community has a codetermination […] is the fascination” (I1). This perceived involvement led to a general positive sentiment in the community. An additional approach to increase the community involvement was to actively support streamers or “classical influencers” (I1), that is people streaming the game on YouTube or Twitch. The crowd was further encouraged to spread the word of mouth by directly asking supporters to tell their friends about the project and by implementing a referrer-program, where backers who successfully invited new backers by using a referrer-link to join the project received a reward. F.Pinkow 1 3 Aggregated category 2nd -order theme Description and exemplary quotations Crowd feedback Crowd feedback was one of the most discussed topics with the interviewees. In line with that, also four projects from the additional six overfunded campaigns explicitly mentioned that they would take feedback into account and asked the crowd to share their ideas, as one project team stated that they “conducted a survey with over 15,000 participants and listened to [the] community” (S10) before launching the Kickstarter campaign. Two of these four projects as well as the project which did not actively ask for feedback at least pronounced that they create the project for the supporters and their needs. For Star Citizen’s case, the interviewees not only considered demanding and incorporating feedback by the project team as crucial to react to needs of the crowd, but especially perceived that the team reacted to feedback to an outstanding extent and even stretch-goals were determined by the crowd itself. Thereby, the crowd acted as a problem-solving unit as some people suggested improvements or even solutions to potentially arising problems during the product development. However, due to a high amount of suggestions the most useful feedback had to be filtered out. The interviewed team members stated that they rather listened to “a low-level tuning side” (I7), or things which “could have influence” (I7) and provided platforms to submit and evaluate that feedback. They set-up a forum for backers who spent a certain, relatively high amount of money, since those people “rather have the interest, that useful things get into the game and that […] acceptable suggestions are made” (I5). CIG also sent prototypes to backers that exceeded a certain funding threshold for testing, which means providing access to an unreleased build of the game. Moreover, the project team stimulated the imagination of the community by asking for creations related to the game, like 3D-models, drawings, or wallpapers. Creations were encouraged by potentially integrating them into the final product. The project team provided official platforms for creations and organized contests where the winners received prizes for the best creations. Appendix B: Secondary data sources Data label Title Uploaded Last accessed Link S1 Enough is Enough - Fixing the Pledge System and the New Player Experience - #nobullshit Star Citizen 02.04.2018 10.06.2020 https:// www. youtu be. com/ watch?v= N2lVP abFMlY S2 Interview to Ulf Kuerschner by Peter (ponch) during CitizenCon 2017. 30.10.2017 10.06.2020 https:// www. youtu be. com/ watch?v= GMsM2 T58enI S3 Star Citizen - Chris Roberts Pitch Video 11.10.2012 10.06.2020 https:// www. youtu be. com/ watch?v= Vhsgi liheP0 S4 Star Citizen adds Kickstarter! 18.10.2012 10.06.2020 https:// www. youtu be. com/ watch? v=- zN5q7 sBKmc 1 3 Determinants ofoverfunding inreward-based crowdfunding Data label Title Uploaded Last accessed Link S5 Star Citizen Interview - Crowdfunding, Pay 2 Win and Goals in the game 29.01.2014 10.06.2020 https:// www. youtu be. com/ watch?v= 1pD2_ Pbvde4 S6 Star Citizen – Kickstarter Odyssey (Part 1) 07.03.2018 10.06.2020 https:// www. youtu be. com/ watch?v= Kz8qc V5nJYY S7 Star Citizen – Things Head South (Part 2) 26.03.2018 10.06.2020 https:// www. youtu be. com/ watch?v= 1yQ56 xIypKA S8 Star Citizen – No End in Sight (Part 3) 01.04.2018 10.06.2020 https:// www. youtu be. com/ watch?v= yR1DF oz6ZuY S9 Star Citizen: Ausführliches Interview mit Chris Roberts (engl.) 05.08.2016 10.06.2020 https:// www. youtu be. com/ watch?v= nvule 1cD_ zk S10 Iron Harvest - Kickstarter Trailer 13.03.2018 10.06.2020 https:// www. youtu be. com/ watch?v= cqdR7 ZhRd7c S11 Project Eternity - Kickstarter Trailer September, 2012 10.06.2020 https:// www. kicks tarter. com/ proje cts/ obsid ian/ proje ctetern ity S12 Torment: Tides of Numerena - Kickstarter Trailer March, 2013 10.06.2020 https:// www. kicks tarter. com/ proje cts/ inxile/ torme nttidesofnumen era S13 Bloodstained: Ritual of the Night - Kickstarter Trailer May, 2015 10.06.2020 https:// www. kicks tarter. com/ proje cts/ iga/ blood stain edritualofthenight S14 Shenmue III - Kickstarter Trailer June, 2015 10.06.2020 https:// www. kicks tarter. com/ proje cts/ ysnet/ shenm ue-3 S15 Shroud of the Avatar: Forsaken Virtues - Kickstarter Trailer March, 2013 10.06.2020 https:// www. kicks tarter. com/ proje cts/ porta larium/ shroudoftheavatarforsa kenvirtu es-0 Acknowledgements I would like to thank Jan-Philipp Ahrens, Andrew Isaak, Dennis Steininger and Baris Istipliler for supporting this work, guiding the questionnaire development, and conducting and providing one interview with two project team members of the primary assessed crowdfunding project. Funding Open Access funding enabled and organized by Projekt DEAL. F.Pinkow 1 3 Data availability The datasets generated during and/or analyzed during the current study are not publicly available due to privacy of the interviewed individuals but are available from the corresponding author on reasonable request. Data sources that are not related to conducted interviews are indicated in Appendix B. Declarations Conflict of interest The corresponding author states that there is no conflict of interest. Open Access This article is licensed under a Creative Commons Attribution 4.0 International License, which permits use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons licence, and indicate if changes were made. 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