Crowd-Funding: Transforming Customers into Investors through Innovative Service Platforms

Consumers have recently begun to play a new role in some markets: that of providing capital and investment support to the offering. This phenomenon, called crowdfunding, is a collective effort by people who network and pool their money together, usually via the Internet, in order to invest in and support efforts initiated by other people or organizations. Successful service businesses that organize crowdfunding and act as intermediaries are emerging, attesting to the viability of this means of attracting investment. Employing a “Grounded Theory” approach, this paper performs an in-depth qualitative analysis of three cases involving crowdfunding initiatives: SellaBand in the music business, Trampoline in financial services, and Kapipal in non-profit services. These cases were selected to represent a diverse set of crowdfunding operations that vary in terms of risk/return for the investor-consumer and the type of consumer involvement. The analysis offers important insights about investor behaviour in crowdfunding service models, the potential determinants of such behaviour, and variations in behaviour and determinants across different service models. The findings have implications for service managers interested in launching and/or managing crowdfunding initiatives, and for service theory in terms of extending the consumer’s role from co-production and co-creation to investment