Are reciprocal gifts the key to the success of crowdfunding projects?

She’s crowdfunding her start-up. But can it get off the ground? Shutterstock

Crowdfunding has seen booming growth for several years. It allows project sponsors to receive relatively small contributions from many individuals through an open call of limited duration, typically via the Internet. Essential to the business world today, crowdfunding has become a serious enterprise: in 2015, crowdfunding campaigns collectively generated more than 34 billion dollars through no fewer than 1,250 active platforms.

While successful, crowdfunding remains a complex and under-researched phenomenon that raises questions about the nature of relationships created between its participants. Is this phenomenon based on purely interest-related interactions (in the economic sense of the term)? Or, on the contrary, is it facilitated by impulses of altruistic generosity between individuals? We conducted a statistical analysis on more than 3,000 projects created through the European crowdfunding platform Ulule in 2015 to find answers to these questions. The resulting study, “Beyond the Opposition Between Altruism and Self-interest: Reciprocal Giving in Reward-Based Crowdfunding”, was published in the Journal of Business Ethics in August 2017.

Giving to get

Crowdfunding project on

On platforms similar to Ulule, which is the most common, project promoters solicit financial contributions in exchange (or not) for varying types of compensation, ranging from symbolic recognition to the personalization of a product. Since its creation in October 2010 up until November 2017, nearly 21,000 projects have been funded on Ulule, garnering around 95 million euros during that time (see updated statistics). The platform features campaigns from a wide variety of categories such as culture, sports, education, technology, and humanitarian projects. Contributors have three commitment options. They can:

  • Contribute an amount without asking for compensation (altruistic approach)

  • Contribute an amount equal to the counterpart (commercial transaction approach)

  • Contribute an amount greater than that of the counterpart (reciprocal gift logic)

Our results show that the more contributions a project receives that are based on a hybrid logic of reciprocal gifts (meaning that the donations exceed the values of the promised compensation), the more that project is likely to reach and even exceed its collection objective. While most of Ulule’s contributions can be considered as transactions (e.g., pre-buying a product or service), the most successful campaigns are those with a significant share of contributors who commit more than the promised reward. In addition, projects that rely solely on transactions are often less successful in their fund-raising campaign, as are projects that receive a larger share of purely altruistic contributions.

How do we explain such a phenomenon? One answer can be found in the works of Marcel Mauss (1872-1950): according to the theory of this eminent French philosopher, gifts compel the recipient to engage in a reciprocal and cyclical relationship with the donor, governed by the triple obligation to give, receive, and give again in return. By giving, I receive something in return from the person to whom I gave the gift, even if such a return is not guaranteed and not equivalent in value. Such returns are often something personalized, unique, or signed by hand; sometimes, it is a personal encounter. In this sense, reciprocal giving is a way for users to develop and maintain social relationships with project creators.

Relationships are what count

The success of crowdfunding platforms that offer counterparts would therefore depend on strong interpersonal relationships between contributors and project promoters in one or more communities. The reciprocal gifts at work in these interactions do not appear to be purely utilitarian or purely altruistic; rather, they seem to belong to a hybrid category at the crossroads of these two thought processes. This gift cycle is not exclusively bilateral, as it can take many paths within a community: a project leader could become a contributor for other projects at certain moments; inversely, a contributor could be supported by his community in turn when launching his own project as a demonstration of gratitude for his previous commitment.

Moreover, our analysis shows that projects that describe themselves as more clearly altruistic or commercial have a lower success rate in their funding than “ambiguous” projects, which intentionally mix philanthropic and commercial logic. For example, entrepreneurs may choose to include a social and/or environmental aspect in their economic project to encourage reciprocal gift, which would then contribute to the success of their campaign.

In summary, even in a “virtual” world that reaches beyond one’s primary social circle of family and friends, the connection between people in a crowdfunding project seems as important as the money or the objects that circulate between them. The Maussian approach offers a relevant insight into forms of exchange of the early 21st century, where our intellectual, legal, and fiscal frameworks seem somewhat – if not completely – surpassed by the phenomenon that is happening right before our eyes.

The full study, “Beyond the Opposition Between Altruism and Self-interest: Reciprocal Giving in Reward-Based Crowdfunding”, was published in the Journal of Business Ethics in August 2017.

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