From friendfunding to crowdfunding: Relevance of relationships, social media, and platform activities to crowdfunding performance

Abstract

Crowdfunding involves raising small amounts of money from a large number of people, typically via the Internet and social networks, to fund a project. Crowdfunding projects are mainly funded by the project creator's relatively small network of family and friends. We argue that mobilizing funders outside this close network positively contributes to the success of a crowdfunding success. To study how project creators seek to attract funding from more distant/potential resources (latent ties) in addition to existing networks (strong and weak ties), we examined usage of social media (Facebook and Twitter) and the crowdfunding platform (website). We analyzed 10 cultural projects hosted on the Dutch crowdfunding platform "Voordekunst." Our results contribute to theorizing on latent tie activation by demonstrating that social media messages and platform updates add economic value to the crowdfunding effort. Our study also explains the moderating effect of these messages on funders of various tie strengths.

New Digital Safety Net or Just More ‘Friendfunding’? Institutional Analysis of Medical Crowdfunding in the United States

“…We also asked how medical crowdfunding was associated with informal safety nets, such as kinship networks and social associations, which people often turn to when formal safety nets fail them (RQ2). Previous research suggests that much of crowdfunding may be essentially 'friendfunding', that is, the funds are obtained from existing personal networks, and the digital platform is simply a novel way of accessing one's pre-existing informal safety net (Borst et al, 2017). Contrary to our expectations, we found that crowdfunding campaign initiation was negatively associated with variables measuring the strength of informal safety nets in a county.…”

“…Facebook friends) of the fundraisers was found to be a success factor for commercial crowdfunding campaigns (Mollick, 2014). Borst et al (2017) referred to this type of funding as 'friendfunding', in which funds come from family members, friends, and close acquaintances, in contrast to undefined 'crowds'.…”

“…They also cannot rely on conventional intermediaries such as government regulators, charities, and third-party watchdogs that could assess and monitor the validity of the campaigns or beneficiaries (Kim et al, 2016). To successfully appeal to the 'crowd', individual fundraisers must therefore work to establish trust with the audience (Borst, Moser, & Ferguson, 2017;Tanaka & Voida, 2016). Given the risk of fraudulent campaigns, potential donors and social media users often seek information about fundraisers' identities and their relationships with the beneficiaries, if different.…”

“…To win over the audience, studies suggest that crowdfunding fundraisers must also foster social relationships and community spirit around their campaigns (Borst et al, 2017;Tanaka & Voida, 2016). Indeed, studies suggest that well-crafted messages, frequent interactions with potential donors on the platform, and active use of social media are important for crowdfunding success (Borst et al, 2018).…”

“…These informal safety nets are a natural fallback when formal safety net institutions fail (Gilbert & Terrell, 2002). If crowdfunding is 'friendfunding' (Borst, 2017) -if all it does is to provide a new medium for these old social processes (English, 2013;Zheng, Li, Wu, & Xu, 2014)then it is unlikely to transform access to healthcare in any significant way. It will replicate and may even widen pre-existing divides, favoring those who are already highly educated, techsavvy, and socially well-connected (Berliner & Kenworthy, 2017).…”