Canadian study reveals that people are persuaded by helping entrepreneurs to benefit society
Crowdfunding has been growing in recent years, offering startups access to capital that they may not be able to access via traditional routes.
Now it seems that there may be another upside to the fundraising route according to a new study from the University of British Columbia.
UBC Sauder School of Business researchers discovered that people will pay far more for social good items when they are crowdfunded.
"Crowdfunding activates feelings of working towards a goal with other people, and what we find is that it activates an interdependent mindset. So, it makes you feel more interconnected with other people," explained Professor Katherine White, who co-authored the study ‘Making the World a Better Place: How Crowdfunding Increases Consumer Demand for Social-Good Products.’
In an experiment, researchers sold pens outside a coffee shop and switched each hour from selling it as a traditional product to one that was part of a crowdfunding effort.
Those who were told it was a crowdfunded product were more willing to buy than those who believed it was a traditional product; and at a higher price - $1.49 vs. $1.05.
It appears that people who want to buy social-good products are significantly influenced by the belief that others are also buying-in to the vision.
However, where products have been fully funded by crowdfunding and released, the effect is diminished.
Canadian crowdfunding
Crowdfunding in Canada was given a boost earlier this year thanks to a promulgated a piece of legislation based on an original OSC regulation.
The move meant that Canadian platforms such as FrontFundr are able to give entrepreneurs another option for fundraising.
“FrontFundr has been continuously innovating and advancing the private markets in Canada,” Peter-Paul Van Hoeken, founder & CEO of FrontFundr told WP. “The 45-505 is another important step towards democratizing the private markets, providing companies better access to capital and enabling the public access to investment opportunities in promising companies.”