Crowdfunding Critical Success Factor Model: The Case of Singapore

My colleague, Nigel Tan at the University of London recently sent me his dissertation titled “Crowdfunding Critical Success Factor Model: A case study in Singapore“. I find the research very insightful and a good resource to understand the relatively new domain of crowdfunding. In the dissertation Nigel attempts to identify the key success factors for a crowdfunding initiative by looking specifically at the case of Singapore and he does a great job.

In the research, Nigel described crowdfunding as a novel initiative where “small amounts combined with a large market of supporters can compare to funding provided by large, single organisations.” Nigel divided crowdfunding initiatives into two categories namely, “basic crowdfunding model with intermediary” (see figure 1) and “crowdsourcing without intermediary” (see figure 2).

Figure 1: Crowdfunding with Intermediary

 Although Nigel looks at crowdfunding initiatives in Singapore, for example, Angel’s Gate and Preparazzi, his research also points out initiatives like FundaGeekSellaband, and Kickstarter. Do have a look at these websites in case you are keen to know about how crowdfunding actually works.

Figure 2: Crowdfunding without Intermediary

Using the Crowdsourcing Critical Success Factor Model, Nigel brings out the similar characteristics of crowdsourcing and crowdfunding to identify the success factors for crowdfunding initiatives in Singapore. Nigel also conducted a survey to find out the relative importance of different factors towards the success of a crowdfunding initiative.

Nigel identifies Vision and Strategy, Human Capital, Infrastructure, Linkages & Trust and External Environment as the main factors affecting the success of a crowdfunding initiatives (Sharma, 2010). The results of the survey which has been based on responses from people all of whom were either active investors or self-managing their crowdfunding investment are as follows:

 Figure 3: Survey Results

Profitability is the main concern and that “shouldn’t come as a surprise as with any investment option profitability is the key determinant.” However, it is important to note that trust-building activities like periodic feedback through a social-medium, a portfolio of past crowdfunded projects, etc. is the second most important factor.

Based on the survey results and the literature review, Nigel concludes that similar factors determine success of a crowdsourcing and crowdfunding initiative. In his research, Nigel proposes that the critical success factors model may also be applied to Singapore but it needs to be “applied with a larger focus on Linkages and Trust.” Linkages and Trust has been found as the most important factor affecting the success of a crowdfunding initiative. From the perspective of Singapore it becomes even more important as Singapore boasts of high internet penetration high literacy rate so human capital and infrastructure and other factors are not bottlenecks.

The question I look forward to discuss with Nigel and readers of the blogs are –

  1. How applicable are the results of the research to crowdfunding initiatives in developing countries?
  2. If there are any examples of successful crowdfunding initiatives in the developing countries?
  3. What can practitioners do to increase the trust of the crowd in the crowdfunding initiative?

About Ankit Sharma

Born in Kashmir, Alumni of London School of Economics, Currently working for the Royal Bank of Scotland, Living in London with absolute passion and hope in the user of Information Technology to solve social problems.
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