This (2011) research tried to find how crowdfunding

This paper uses the successfully funded venture
‘Pebble: E-Paper
Watch for iPhone and Android’ as a case study from Kickstarter and critically analyses why it has been successful by drawing on
academic literature. It also demonstrates an understanding of the increasingly
important source of funding (crowdfunding) in the internet era and the
challenges faced. More recently, venture
capital markets have grown worldwide ‘both in terms of capital under management
and the number of firms providing finance.’ (Ley & Weaven, 2011). ‘Crowdfunding is a rapidly growing phenomenon wherein
entrepreneurs seek funding for their entrepreneurial activities from a
potentially large audience of interested individuals. Crowdfunding has exploded
in popularity over the last decade and now accounts for tens of billions of
dollars annually.’ (Short et al., 2017). Crowdfunding is of interest because of its increased
importance as a source of funding entrepreneurial ventures in the internet era. Despite
its importance, there remains a paucity of research on crowdfunding. This is
likely to be the case as it is a newer concept. Nonetheless, there is a growing
body of literature that recognises the importance of crowdfunding as a source
of finance for entrepreneurs. Schwienbacher & Larralde’s (2010) study considered ‘crowdfunding as an alternative way of financing
projects’ as well as the ‘factors affecting entrepreneurial preferences for
crowdfunding as source of finance’. (Schwienbacher & Larralde, 2010). Ley and Weaven’s (2011) research tried
to find how crowdfunding ‘may be appropriately adopted within the start-up
equity-financing context.’ This paper begins with
a brief description of crowdfunding and the problems associated. It will then
go into detail on the
successfully funded Kickstarter venture ‘Pebble: E-Paper Watch for iPhone and Android’ and
the reward model of crowdfunding. It concludes by summarising why the venture
was successful.

Crowdfunding is a source of finance which allows individuals (not
financial institutions, such as banks) to contribute to the funding of a
project or venture. This is commonly done over the internet. ‘Several platforms have emerged that help intermediate between
crowdfunders (those who invest in projects) and individuals with a project’. (Schwienbacher & Larralde’s, 2010). The most successful is Kickstarter where since its inception, over
14 million backers have funded 137,538 projects to date. (Kickstarter, 2018). The
platform uses a reward model of crowdfunding.
This is where backers of a project receive a reward based on their contribution
to the project. An independent study by Professor Mollick from the University
of Pennsylvania found that ‘9% of Kickstarter projects fail to deliver rewards’
which the platform considers to be ‘reasonable’. (Kickstarter, 2015).

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The ‘Pebble: E-Paper Watch for iPhone and Android’ is a customisable
watch. It allows customers to ‘download new watchfaces, use sports and fitness
apps, get notifications’ from their phone. (Kickstarter, 2018). After launching
in 2012, it became the ‘the first commercially successful smartwatch’ (Pesce,