A Taxonomy of UK Crowdfunding and Examination of the Potential of Trust and Empathy in Project Success

Lead Research Organisation: Northumbria University
Department Name: Fac of Arts, Design and Social Sciences

Abstract

The proposed research aims to comprehensively scope the UK online crowdfunding field and develop a 'taxonomy of UK crowdfunding'. This will map out current activities across domains (e.g. investment, reward-driven, philanthropy), economic scale, geographic location and economic 'reach' etc. to create a clear picture of the heterogeneity of the developing online crowdfunding sector in the UK. It will do this through a systematic search and review of existing crowdfunding platforms and related literature from across academic publications, crowdfunding practitioner reports, policy, reports produced by the charitable economic innovation and development sectors (e.g. NESTA) and business reports. A 'taxonomy of crowdfunding' will be developed which identifies and defines domains of activity against, for example, funders' motivations, to develop an understanding of the success factors in bringing projects to fruition. Following this, qualitative analyses will explore communicative exchanges within the social networks that are generated on crowdfunding platforms around particular projects, among and between project 'founders' and project 'funders'. Preliminary empirical research on Kickstarter by Briggs (2013), and analyses elsewhere of the 'success signals' of funded projects on this platform (Mollick, 2013) suggest that communication and building of a sense of community by project founders, with and among funders plays an important role in project success. In this context success is measured as a project idea presented on the site attracting enough backers to reach its stated funding goal and go forward to realisation. Building on this, and drawing from media and visual communications theories around mediated forms of representation, and marketing theories on trust signaling and commercial value networks, the research will examine if and in what ways trust is built by project founders within project networks and any potential impact on funders' behaviour, including buying and investment decisions. The proposed research will also explore the potential affective role of audio visual media, particularly in relation to empathy; and examine if and how founders signal 'pitch trustworthiness' in promoting their projects to potential funders using mediated forms e.g. video.

The research will focus on UK-based platforms, and to a lesser extent international sites that enable use by UK-based founders. The proposed research aims to develop greater understanding around the potential of the crowdfunding model: from economic, social and cultural perspectives, while identifying its limitations and specific pitfalls for particular sectors and domains.

Planned Impact

Producing a clear picture of current crowdfunding in the UK and mapping its characteristics with regard to domains of activity and geographic and economic scope, while also eliciting insights into the potential of 'ERT' in leveraging project success (or otherwise), will have potential benefit for public, private and third sector organisations and individuals.

The public sector include: Government departments BIS and DFID; MPs, including the Westminster Crowdfunding Forum; and the Northern Ireland Executive and DETI. The Digital Economy has generated a host of as yet unregulated but rapidly growing novel investment opportunities through various micro-finance models which are still establishing: the research potentially impacts other related bodies such as financial and internet regulators FSA and OFCOM. The work also potentially has value for policymakers working in economic policy.

The research will impact on a wide range of academic disciplines but particularly those involving research into new business models and ways in which services and products are marketed, financed, produced and distributed.

The project will establish and develop a new research team across a Newcastle-upon-Tyne-Northern Ireland or 'NCL-NI' corridor, and further develop and train-up researchers.

The research potentially has value by contributing to an informed debate on the sustainability of the Cultural Industries. In the regions, this is increasingly a political issue as London is perceived to be "eating up" limited public cultural funding resources (Powell, Gordon and Stark, 2013). As cultural organisations adopt entrepreneurial and charitable funding models to sustain what was previously publicly-funded, the research will impact across organisations such as Arts Council England, and hundreds of national and regional arts and cultural charities and associated Community Interest Companies.

Similarly, by generating discussion and raising awareness around micro-funding opportunities, the research will impact charities, non-profit and third sector organisations.

Another important areas of potential impact includes the financial services sector, businesses and business consultants. And related to this: regional investment organisations e.g. Invest NI; think tanks, and charitable innovation organisations such as NESTA, which has produced reports on crowdfunding and other new alternative financing models.

The Creative Industries are often discussed (including by the British Government and NI Executive) as a future area of jobs growth. Already prominent on reward-driven crowdfunding sites is a spectrum of creatives (artists, product designers, filmmakers, gaming companies etc.) who adopt this financing model in their attempts to enable economic and cultural sustainability. The research will help to inform project founders in the Creative Industries on approaches to crowdfunding products and servcies. The research potentially impacts on the critical issue of economic sustainability more broadly, on jobs creation and changing patterns of labour. While crowdfunding provides opportunities, it is also associated with trends towards informalisation and 'precarity' of labour. The research then potentially impacts on researchers in media theory and sociology.

Publications

10 25 50
 
Description We took a necessarily agile approach to learning about and scoping a very dynamic and still emerging field that lacks authoritative literature. Of three complementary literature reviews that were conducted one necessarily considered the 'grey' (self published and/or non-peer reviewed) literature to reflect the fact that much relevant knowledge is held outside or at the margins of formal academic understanding. The review revealed the predominance of economic and financial conceptual frameworks in describing the importance and impact of crowdfunding activities with a large majority that did not attempt to conceptualise crowdfunding along categorical lines at all. An emphasis on single economic measures of crowdfunding 'success' and 'failure' in the emerging literature drew attention to the fact that other outcomes are potentially being ignored and this informed our mid-term focus.

To reflect the potential applications of online crowdfunding in the UK we looked at examples of campaigns from across the three broad domains of activity; creative industries; social enterprises; and for-profit. Our qualitative work with research stakeholders involved interviews across the UK and a series of crowdfunding workshop and roundtable events in the North East involving local business and professional bodies, a multitude of smaller voluntary sector and cultural organisations and SMEs. These had the dual aim of generating research insights and also helping organisations explore near-future uses of crowdfunding and identify potential disruptions to business processes and relations. This aligned programme of 'how to' awareness-raising and discussion workshops-and evaluations facilitated through complementary HEIF and ERDF funding-enabled us to apply our emerging insights and feedback to organisations from a practice 'in the wild' perspective, informed by participatory design practices; this novel design-social science approach enabled us to capture the crowdfunding experience much more fully than existing popular taxonomies (e.g. 'donation', 'rewards', 'equity', investment').
Exploitation Route The potential of design in social science: using participatory creative methods to facilitate a social design/ethnographic process to reveal detailed insights into the challenges and opportunities of crowdfunding (and related disintermediated 'peer-to-peer' online financial exchange) from the perspectives of social enterprise organisations that are planning and launching their first campaign, and the potential for disruption to existing organisational practices, memberships/values and wider engagement. And related to this; new ways of practicing, theorising and engaging within social science research through the uses of and effects of new and emerging p2p practices, from the perspective of social enterprise organisations (or indeed, their supporters or the platform infrastructure).

We have only scratched the surface of understanding the role of trust in crowdfunding across the various models of donation, rewards, equity and debt. As trust is an important aspect of interpersonal relationships insights developed through focused examination of e.g. equity platforms could be applied more widely to other forms of online social exchange.
Sectors Communities and Social Services/Policy

Creative Economy

Digital/Communication/Information Technologies (including Software)

 
Description The PI remains periodically in touch with two of the major UK crowdfunding platforms, involving one of them in two subsequent RCUK bids, and continues discussions with the rewards-based and equity platforms towards both identifying potential collaborative research problems. A local volunteer-run community cinema which attended two of our 'how to' workshops went on to raise more than £40,000 from its crowdfunding campaign, towards refurbishment of its new building. The underlying research continues to be developed in wider research around alternative and parallel economic models. Briggs speaks at UK Crowdfunding events focused on supporting social and cultural action and any potential impact from these are being captured as of early 2019. Update 2020: the earlier research has been built on and practically applied through the PhD project; one tangible outcome was a successful design collaboration with a local social mission bakery, which ran a successful campaign and subsequently leased its first premises. The bakery has gone on to run additional campaigns.
First Year Of Impact 2015
Sector Agriculture, Food and Drink,Creative Economy,Financial Services, and Management Consultancy,Culture, Heritage, Museums and Collections
Impact Types Cultural

Societal

Economic

 
Description Written evidence published by the House of Lords Digital Skills Select Committee
Geographic Reach National 
Policy Influence Type Contribution to a national consultation/review
 
Description Designing for Crowdfunding Social Innovation
Amount £43,659 (GBP)
Organisation Northumbria University 
Sector Academic/University
Country United Kingdom
Start 09/2017 
End 09/2020
 
Description Higher Education Innovation Fund (HEIF)
Amount £3,000 (GBP)
Organisation Higher Education Funding Council for England 
Sector Public
Country United Kingdom
Start 02/2015 
End 07/2015
 
Description Network grant for PIs to mentor ECRs
Amount £1,200 (GBP)
Organisation EMOTICON 
Sector Charity/Non Profit
Country United Kingdom
Start 03/2017 
End 09/2017
 
Description Northumbria University BIPC fund
Amount £1,300 (GBP)
Organisation European Commission 
Department European Regional Development Fund (ERDF)
Sector Public
Country Belgium
Start 04/2015 
End 07/2015
 
Description Northumbria University BIPC fund
Amount £5,000 (GBP)
Organisation European Commission 
Department European Regional Development Fund (ERDF)
Sector Public
Country Belgium
Start 01/2015 
End 03/2015
 
Description "Which City Will Lift the Global Crowdfunding Crown?" seminar and discussion event organised by the Crowdfunding Centre 15.08.15 
Form Of Engagement Activity A formal working group, expert panel or dialogue
Part Of Official Scheme? No
Geographic Reach International
Primary Audience Professional Practitioners
Results and Impact Contributed to discussion during the afternoon session involving (by Skype) Richard Swart, Director of Research, The Program for Innovation in Entrepreneurial and Social Finance University of California at Berkeley to compare research agendas in the US and UK and to try to develop a strategy for linking up centres of knowledge towards an international perspective. While the UK 'lifts the crown' in terms of its rapidly growth, especially in terms of equity crowdfunding and as a direct consequence of the UK's light touch regulation, academic research in the US is more advanced by several years.

This was more information and knowledge exchange and helped to strengthen fledgling relationships with industry partitioners; for example, a crowdfunding consultant met at the event has since contributed to a full-day crowdfunding workshop with an arts organisation in Newcastle-upon-Tyne.
Year(s) Of Engagement Activity 2015
 
Description Crowdfunding for Philanthropy Panel during GeNErosity Festival October 2018 
Form Of Engagement Activity A talk or presentation
Part Of Official Scheme? No
Geographic Reach National
Primary Audience Third sector organisations
Results and Impact Helped the NE Community Foundation (CF) to organise a panel to support their crowdfunding philanthropy event, bringing in crowdfunding consultant from Twintangibles to contribute along with the CF's representative from platform Crowdfunder UK for a 2hr session with 70+ attendees.
Year(s) Of Engagement Activity 2018
URL https://www.generosityfestival.co.uk/festival/crowdfunding-­philanthropy-­good
 
Description Crowdfunding workshop with Co-operation Ireland (LEGaSI project) 
Form Of Engagement Activity Participation in an activity, workshop or similar
Part Of Official Scheme? No
Geographic Reach National
Primary Audience Public/other audiences
Results and Impact Workshop held in East Belfast for peace-building charity Cooperation Ireland as part of its LEGaSI project with view to designing and utilising crowdfunding campaigns to promote civic engagement of citizens living in politically divided communities, and as a form of community action and social and cultural exchange. LEGaSI seeks to facilitate people from within the Protestant Unionist Loyalist (PUL) areas to strengthen their communities. The workshop engaged with around 15 individuals aged approximately 25-45 years identified as potential influencers within their communities.
http://www.cooperationireland.org/programmes/community-programmes/legasi/
Co-operation Ireland followed up with email queries and responded to request from participants to circulate the presentation and wider information on crowdfunding.
Year(s) Of Engagement Activity 2015
URL http://www.cooperationireland.org/programmes/community-programmes/legasi/islands/
 
Description Innovation Elevator crowdfunding talk to 26 businesses in Newcastle-upon-Tyne 
Form Of Engagement Activity A talk or presentation
Part Of Official Scheme? Yes
Geographic Reach Regional
Primary Audience Professional Practitioners
Results and Impact The talk generated a lot of questions, discussion and expressions of interest to take ideas further, both immediately after and over lunch.

Briggs went on to work with one arts organisation to explore whether and how crowdfunding could be approached to help mitigate the recent cuts to its public funding. Briggs organised an intensive 1-day workshop with the arts organisation's three core members and three of its board of directors and a crowdfunding consultant. Following this PI Briggs helped to organisation to write a small grant application to buy in extra help to explore the potential and develop a campaign.
Year(s) Of Engagement Activity 2015
 
Description Invite to attend Science and Security: Governance, Ethics and the Law (1 March 2016, London) 
Form Of Engagement Activity Participation in an activity, workshop or similar
Part Of Official Scheme? No
Geographic Reach National
Primary Audience Policymakers/politicians
Results and Impact PaCCS Science and Security Policy Workshop at the British Academy to discuss ethical & legal challenges facing policy-makers & practitioners working in the defence and security sectors as they manage the development application of new technological capabilities. Research by five invited academics working across three key themes (Data, Drones and Social Media) was used to provoke discussion on the changing threats and security cultures, with the aim of produce a PaCCS Evidence Briefing Note based on discussions.
Year(s) Of Engagement Activity 2016
URL http://www.paccsresearch.org.uk/news/launch-of-three-new-paccs-policy-briefings/
 
Description Invited by The Personal Data and Trust Network (http://pdtn.org), managed by Catapult and its partners, to speak at a London event on online reputation and opinion formation 
Form Of Engagement Activity A talk or presentation
Part Of Official Scheme? No
Geographic Reach National
Primary Audience Industry/Business
Results and Impact The workshop brought together experts from different communities to address some of the emerging issues in reputation-driven environments, specifically focusing on peer-to-peer (P2P) digital platforms which are changing daily economic interactions on global scales. The session comprised a number of formal academic presentations followed by discussion, with an audience drawn from academia and business. Follow up included invites to attend a conference at UCL and exchange of info with a senior banker involved in government-business negotiations relating to the 'Northern Powerhouse'.
Year(s) Of Engagement Activity 2016
URL https://pdtn.org/event/engendering-trust-infrastructuring-opportunity-a-study-of-uk-crowdfunding/
 
Description NE Crowdfunding Week 23-27th February 
Form Of Engagement Activity A formal working group, expert panel or dialogue
Part Of Official Scheme? No
Geographic Reach Regional
Primary Audience Professional Practitioners
Results and Impact a stakeholder engagement/KE week of events organised by Briggs with support from Anderson and sponsorship from HEIF; 'How to' workshops were held with: Tyne and Wear Archives; Sustainable Enterprise Strategies, a business development co-operative, in North Shields and members of the cooperative cinema. In addition, NE focused round table policy event: the NE LEP provided the chair, Jeremy Middleton, and involved: Revolution Software (speaker); FSB; Northstar Ventures x 2; Gateshead Council; Twintangibles (speaker); Whosit and Whatsit (speaker); Sage; JEREMIE2; Crowdcube Northern Rep. (speaker) and Crowdcube Business development; Durham CC; NCVS; Newcastle City Council (culture and enterprise teams); Lending Crowd (speaker).


Many contacts developed with participants subsequently contributing to a workshop and being involved in a new research bid.
Year(s) Of Engagement Activity 2015
 
Description PaCCS and Co-operation Ireland round table and workshop 
Form Of Engagement Activity Participation in an activity, workshop or similar
Part Of Official Scheme? No
Geographic Reach National
Primary Audience Professional Practitioners
Results and Impact PI Briggs was invited to present early findings from the research at Durham University with a view to working with the charity Co-operation Ireland to co-develop research and to contribute to it existing LEGaSi programme promoting civic engagement within sociopolitically divided communities in Northern Ireland and specifically to explore how the crowdfunding campaigning process could be utilised within mechanisms to mobilise community and social action locally.

Briggs was then invited to Belfast and ran a 'how to' crowdfunding workshop with young leaders in East Belfast, discussed proposed campaigns and wider issues around fundraising among grassroots groups in Northern Ireland. Following this, the charity passed on feedback about planned campaigns and requests for the presentation slides and further information.
Year(s) Of Engagement Activity 2015
URL http://www.cooperationireland.org/programmes/community-programmes/legasi/islands/
 
Description Presentation at the launch of the Centre for Innovation Finance, Nesta, London 
Form Of Engagement Activity A talk or presentation
Part Of Official Scheme? No
Geographic Reach International
Primary Audience Public/other audiences
Results and Impact Liam Collins at Nesta invited PI Briggs and RA Burns to present separately on the qualitative and quantitative aspects of the research at its public crowdfunding seminar, held to mark the launch of the Centre for Innovation in Finance, London, 7th May 2015. Other invited presenters included from universities of Warwick, Durham, Nottingham, Dundee, Oxford, LSE and London Business School as well as a public audience. Afternoon seminar discussions were held to identify new research project collaborations.

Primarily an interesting knowledge exchange and networking activity.
Year(s) Of Engagement Activity 2015
 
Description Westminster Crowdfunding Forum 
Form Of Engagement Activity A formal working group, expert panel or dialogue
Part Of Official Scheme? Yes
Geographic Reach National
Primary Audience Professional Practitioners
Results and Impact PI Briggs attended twice, once with co-I Anderson, contributing to the group's understanding around the scope and methodological challenges of of academic research.

Many important crowdfunding contacts have been formed through the Forum. For example, a representative from one of the large crowdfunding platforms later visited PI Briggs and co-I Anderson in Newcastle where meetings with the City Council and NE LEP were held to discuss the potential of designing and developing a 'holistic' peer-to-peer infrastructure that would bring together the interests of the Council (small business development), the NE LEP (access to finance) and the University (student innovation and entrepreneurialism).
Year(s) Of Engagement Activity 2015