Sustainable funding for small businesses: An investigation into the dynamics of the recurring crowdfunding model

Abstract

In an era of one-off funding, entrepreneurs and small businesses struggle to find sustainable funding sources. A novel solution – the crowd patronage model, has emerged in recent years. This model incorporates elements from traditional crowdfunding but is systematically different due to the lack of a fixed funding goal or duration. To capitalise on the long-term nature of crowd patronage, this article explores whether factors that have an impact in traditional crowdfunding will have a similar impact within an extended duration beyond what traditional crowdfunding typically offers. We posit that incentivising mechanisms will have a long-term impact on crowd patronage, whereas project characteristic measures will exhibit short-term effects. Using data from 3229 crowd patronage projects, we find that our results largely support our hypotheses. Given our findings, we propose using project characteristics to attract contributors before shifting focus to incentivising mechanisms as the project matures in order to maximise crowdfunding returns.