Donors, Buyers, and Information Disclosure in Crowdfunding Markets: A Case of Platform Split-up

Crowdfunding platforms, a fast-growing method for entrepreneurs to finance their ventures, are struggling in improving crowdfunding campaigns’ market performance as platforms expand to include more diverse participants. In this paper, the authors study how a platform policy that changes the platform size and backer composition (donors vs. buyers) influences the platform participant behaviors and the platform market outcomes, using an event study of Indiegogo’s launch of Generosity.com for charity campaigns. Their results show a higher probability of reaching funding goals and more funds collected for the Indiegogo platform's business campaigns after the platform split-up. Such changes are driven by fewer campaigns being launched on Indiegogo after the platform change, and more importantly, more costly campaign information (such as images and videos) provided by the campaign creators. Buyers are more sensitive to such campaign information and, therefore, contribute more to campaigns after the platform change. These results are consistent with the notion that the entrepreneurs’ information disclosure strategy is driven by potential backers’ motivations to support the campaign. The study provides rich and important managerial implications for platforms and their participants.