REPORT the elements leading to successful crowdfun

Based on the information on reputable crowdfunding platforms, seven elements are leading to the success of crowdfunding campaigns.. The fundraiser will post information about the campaig

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REPORT The elements leading to successful crowdfunding

campaign and application in Vietnam

Nguyen Thi Minh Chau Nguyen Ngoc Ha My Nguyen Ngoc Quynh Tram

Le Hoang Yen

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September 2022 ABSTRACT

This study seeks to give an analytical understanding of crowdfunding by examining the impact of project quality and founder quality on the success of crowdfunding Based on the information on reputable crowdfunding platforms, seven elements are leading to the success

of crowdfunding campaigns After doing a questionnaire and comparing two cases, the detailed information, incentives, and value of the campaign are considered the most affected elements Besides, in equity and lending-based crowdfunding, backers also care about the profit potential of the campaign These findings show that backers focus on reliable information that can build their trust, and the benefits they will get if they invest in the campaign These elements are still true when applied to the situation of crowdfunding in Vietnam when analyzing the case of Thien Nam Elevator - a successful case in Vietnam.

TIEU LUAN MOI download : skknchat123@gmail.com moi nhat

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supports small campaigns a lot With this kind of fundraising, both profit and non-profit campaigns have a chance to succeed even if they come from a small group or corporation.

This form of investment can help small groups of people or SMEs to introduce several creative ideas for products or campaigns to society However, these campaigns cannot always successfully approach the backers, who invest in them As a result, fundraisers need some factors that can support their campaigns

Despite its popularity throughout the world, crowdfunding has just become familiar in the Vietnam market in recent years Then, there are some difficulties for fundraisers and backers to approach it in the right way However, it is undeniable that several crowdfunding campaigns in Vietnam have succeeded in raising funds

In this report, our team will discuss elements leading to successful crowdfunding campaigns, then, analyze how Vietnamese crowdfunding campaigns apply these elements in reality.

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LITERATURE REVIEW

1 Overview 1.1 Definitions:

Crowdfunding is a method of raising capital to sponsor endeavors and companies

Fundraisers can now use online platforms to gather money from many people.

Crowdfunding is most often used by startup companies or growing businesses as a way

of accessing alternative funds It is an innovative way of sourcing funding for new projects, businesses, or ideas.

It can also be a way of cultivating a community around your offering By using the power of the online community, you can also gain useful market insights and access to new customers.

This guide is aimed at entrepreneurs, businesspeople, and companies, especially small and medium enterprises If you are thinking about ways of financing a new business or idea

or have heard about crowdfunding and want to learn more, you may find this guide useful.

Crowdfunding is done through online platforms that support fundraising services The fundraiser will post information about the campaign as well as the reason to raise funds on the platforms to attract investment.

1.2 Main types of crowdfunding:

Donation-Based:

Donation-based crowdfunding is a way to source money for a project by asking many contributors to individually donate a small amount to it In return, the backers may receive token rewards that increase in prestige as the size of the donation increases For the smallest sums, however, the funder may receive nothing at all.

Sometimes referred to as rewards crowdfunding, the tokens for donations may include pre-sales of an item to be produced with the funds raised Donation-based crowdfunding can also be used to raise funds for charitable causes.

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Because this sort of crowdfunding is predicated on donations, funders do not obtain any ownership or rights to the project—nor do they become creditors to the project.

Receive gratitude gifts (Reward-based):

The sponsorship amount is divided into each package, and each package is a corresponding gift Sponsors will receive gifts when the project is successful, regardless of profits or ownership shares.

For example, a jewelry designer might reward everyone who contributes $100 with an original handmade bracelet, or an inventor of solar-powered lawn mowers might give a mower to contributors at the $1,000 level Rewards don’t have to be substantial; some businesses offer a simple handwritten thank-you note.

Equity-based:

Equity crowdfunding is a unique way to raise capital for your business without taking

on new debt It’s a form of fundraising that attempts to attract investors who are willing to contribute funds toward your business goals in return for a financial stake in the company.

In general, equity crowdfunding is a business funding model that involves collecting smaller sums of money from a larger number of private investors Would-be investors may

be able to get involved for as little as $100 This approach differs from trying to attract sizable investments from venture capital firms or angel investors—a business capital strategy that’s out of reach for many startups and established small businesses alike.

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1.3 The benefits of crowdfunding Backers

 Involvement – investors may find it rewarding to be involved in the development of a specific business, project, venture, or cause Crowdfunding enables potential funders to choose how they invest their money more freely.

 Returns – crowdfunding may offer investors higher returns than those available from other, more traditional, financial products.

 Costs – by obviating the need for various intermediaries such as brokers, investors may receive benefits via reduced search and transaction costs.

1.4 The risks of crowdfunding Backers

 Information asymmetry – potential funders may face the problem of information asymmetry and find that they cannot conduct proper due diligence on the borrower.

 FSCS – investment via crowdfunding platforms does not provide the investor with any access to the government's Financial Services Compensation Scheme, which may leave the investor with no access to compensation if the borrower becomes insolvent.

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 Liquidity – due to the lack of any established secondary market for crowdfunded investments, investors may find it difficult, if not impossible, to cash out their investment.

 Start-ups – many borrowers on crowdfunding platforms are start-ups or businesses in the early stages of their development There is a significant risk that the borrower's business will fail, resulting in a capital loss to the investor.

 Shares – it is unlikely that shares issued on crowdfunding platforms will carry any associated voting rights or rights to dividends for the investor In addition, the value of any investment may be significantly diluted if more shares are issued.

Fundraisers

 Reputation – whether through lack of experience or time pressures, borrowers may fail

to achieve their proposed goals set out in their initial pitch This may result in irreversible reputational damage to their business and the borrower's public support.

 Intellectual Property – to receive public backing, borrowers may find that they must make a trade-off between producing a detailed and thorough initial pitch and exposing designs or products that have not yet been properly protected.

 Management – successful crowdfunding campaigns may result in a borrower having to manage many investors' expectations, demands, and investments Without the

appropriate resources, borrowers may struggle to successfully carry out this task.

2 The legal framework of crowdfunding in Vietnam

In recent years, the wave of startups has been developing strongly in the business community and the young generation in Vietnam However, the environment and conditions for start-ups, including the legal framework, support policies, venture capital funds, etc., still face many obstacles Completing the conditions, in which focusing on financial policies as a pedestal is a requirement, helping the Vietnamese startup community to rise and develop strongly.

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To promote and support start-ups, the Government has issued several financial policies

to support directly (such as tax policy, credit policy, etc.) and indirectly through the incubator model Specifically:

Firstly, on tax policy: Implement tax exemption and reduction policies for start-ups to help businesses have more financial resources to invest in expanding production and business and reduce dependence on loans banks and save business costs, thereby reducing costs, contributing to improving competitiveness, and attracting investment capital These policies are outlined in Clause 1, Art.11, Circular 96/2015/TT-BTC; Clause 1, Article 16 of Decree 218/2013/ND-CP guiding the implementation of the Law on corporate income tax, Decree 13/2019/NĐ-CP on science and technology enterprises, etc.

Secondly, about credit policy: Through the Bank for Policies, the Government has implemented incentives for start-ups such as interest-supported credit, loan guarantees from credit institutions, funds national technological innovation fund, national science and technology development fund, and a small business support fund The policies related to credit support: Article 8, 20 of the Law on Supporting SMEs; Decree No 38/2018/ND-CP

on investment for innovative start-up SMEs in Vietnam; Decree 39/2019/NĐ-CP, etc.

Third, about the incubator model: indirect support for start-ups through the promotion

of incubators helps businesses operate effectively, increasing independence and financial autonomy for incubators In Vietnam, a business incubator model has also been developed in several priority areas, such as science and technology, to support newly established

businesses Accordingly, the State provides funding for the establishment and operation of public incubators and tax incentives.

Although there are specific policies to support projects or start-ups, the government still does not have specific policies for crowdfunding Therefore, many inadequacies create conflicts when implementing crowdfunding.

Specifically, in the lending-based model, loan transactions between investors (lenders) and project owners (borrowers) are not at all contrary to the provisions of current laws, more specifically the Code of Conduct Civil 2015, provided that participating investors are individual investors.

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In contrast, in the equity-based model, it is not a simple matter to determine whether the nature of the project owner's share issuance transaction to investors is consistent with the current legal framework Project owners are completely free to call for capital from 1-2 certain investors, but once the number of investors becomes larger and more diverse, there are conflicts with the Securities Law 2019 regarding the “public offering of securities”.

Donation and reward-based, are all forms of non-profit fundraising, so they are generally a form of donation The law stipulates that charity donation is a civil activity, so the caller and capital contribution, in this case, will be negotiated and decided by

themselves However, if the act of wrapping capital with signs of fraud, taking possession of the property, or taking personal advantage, will be criminally handled.

3 Elements lead to the successful crowdfunding campaign Detailed and clear description

The description is the script the company would use to speak and tell in crowdfunding

to persuade backers to invest in their campaign The description contains important information such as the products, the utility, the profit, etc that are attractive enough to get funding.

The goal of crowdfunding is not just to go out and beg for money but to invite people

to invest and help to fulfill a particular goal for the business To achieve this, people who are likely to invest need to know clearly and detail about the campaign.

Fundraisers can get a first production run, launch a new location, and add a feature to the base product or service so that backers can understand clearly what they are doing They need to break down where the money they are asking for will go in this specific phase of the business because investors always focus on details to know whether it deserves to invest in

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souls but also gives them specific benefits and solutions they would get after investing in them.

And fundraisers need to set their goals as low as possible for each campaign With some crowdfunding platforms, they will get no money if the campaign is not successful, so just keep the expected profits down the road The numbers - the goals - need to be concrete, realistic, and focus on solving the single stated problem we have just engaged our brackets

Emphasizing the value of the product or campaign is also an important key leading to successful crowdfunding Especially, the company also can figure out the potential backers.

Research their concerns, and their goals for the community Following that, backers would emphasize the value of the campaign that potential backers want to attract their attention.

Legitimacy

Legitimacy is commonly defined in political science and sociology as the belief that a rule, institution, or leader has the right to govern It is a judgment by an individual about the rightfulness of a hierarchy between a rule or ruler and its subject and about the subordinate's obligations toward the rule or ruler.

Legitimacy builds a fundraiser's identity and makes them influential When the business is legitimate, fundraisers have a greater chance of pleasing their customers Also, they are not afraid to put themselves out there and can be proud of their business, so they have free reign to spread the word about their brand.

Many backers will believe it when they see it In other words, they require evidence that the companies are legitimate and picking up steam before deciding to back the crowdfunding campaign To prove the legitimacy, show the backers what they will be supporting in detail — how it works, how fundraisers came up with the idea, and even pictures or videos if fundraisers have a prototype Because fundraisers are likely to never

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meet the backers, the more proof the companies can provide that their plan is legitimate the better.

Profit potential

The success of any business depends on its ability to continually earn profits Profit equals a company’s revenues minus expenses Earning a profit is important to a business because profitability impacts whether a company can secure financing from a bank, attract investors to fund its operations, and grow its business Companies cannot remain in business without turning a profit

Profit potential also can be defined as the potential of the ability of the long-term strategies of the products and campaigns to be sold in the market and the profit these products can bring back.

Fundraisers need to understand the importance of profitability in business management while developing strategies, especially long-term strategies and tools which give the company the best chance at remaining profitable.

Because crowdfunding hinges on reciprocity It relies on a win-win relationship If fundraisers want backers to pay for their fundraisers need to give backers deserved benefits.

The backers always care much about what they would get if they invested in this Therefore, fundraisers can draw up a clear plan and show the profit potential of each stage to the investors to attract backers by the possibility of a high return on their investments.

When choosing the potential to show, the companies can ask themselves, if they are the backers, would they invest? How will they benefit from the campaign? Does it deserve

to be paid for?

Incentives

Generally, an incentive is anything that motivates an individual to accomplish something Economic incentives, therefore, are the financial motivations for behaving in a particular manner They encourage people to pursue their financial preferences This economic incentive definition confirms that economic incentives can act as instruments for stimulating participation in an activity These tools may provide valuable information on how consumers and businesses respond to market factors such as profits and prices.

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In reward-based crowdfunding, incentives are the rewards or promotions that backers receive after investing While in equity and lending-based, incentives are gross profit and dividends

Incentives need to appeal to people who’ve never heard of the companies: Along that line, crowdfunding should be audience building first, fundraising second, meaning the page should appeal to folks who are not personally familiar with the companies As with everything else on the page, the content must have enough strength to persuade investment without knowing about the writer.

Supporters want to feel special: In terms of the psychology of crowdfunding supporters, even from disparate fan communities, you can boil down what they want from an incentive in four main ways The first is that they want to feel special and of high status, so offering things like premiere invites, exclusive early access, and producer credit tend to go over well Be sure to price appropriately because this can work against you too- if you value specialness too low, they will assume it’s not all that special.

Supporters want to be recognized: To accommodate this, in addition to making special thanks and/or producer credit an option, be sure to thank them publicly- share the incentives you give to them on your feeds and tag them when you can If you include a link to your campaign as well in the post, when they share it on their feeds, they aren’t just spreading awareness but spreading the link as well.

Attractive marketing strategies

Crowdfunding marketing is marketing strategy businesses employ before, during, and after crowdfunding campaigns to succeed Well-thought-out crowdfunding marketing campaigns can help small businesses reach more potential investors to get monetary support and meet crowdfunding objectives.

When fundraisers promote campaigns, they reach a large group of people, increasing the chances of businesses getting funded A powerful marketing campaign can help them create relationships with the audience Creating and running a crowdfunding marketing campaign offers them opportunities to engage with the community, which can foster trust and confidence Also, crowdfunding marketing campaigns leverage social media, email marketing, and other marketing avenues to maximize the success of your crowdfunding.

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Creative and unique ideas

A basic law of economics dictates that creative and scarce supply inherently creates greater demand Create greater demand for your startup by limiting one or more of the higher-level rewards to just a few — this will inflate demand for those rewards and result in higher pledge amounts for your crowdfunding campaign!

Creativity is not an element that can make backers decide to invest but it is still an important factor to attract and boost the curiosity of the backers Making backers have some small interests in the project may lead to big investment so fundraisers also need to carefully prepare a creative idea The ideas are not necessarily a whole new one, but fundraisers can also modify the old ones into new and attractive ideas.

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The questionnaire was posted to a crowdfunding group on the Facebook platform.

1.3 Case studies method

Select 2 cases on the Kickstarter platform that both are technology reward-based campaigns: 1 successful and 1 unsuccessful case in crowdfunding Then, analyze the project's existential points to compare the difference.

2 Process and analysis 2.1 Select information from reputable sources

Results after referencing sites like KissKissBankBank; RocketHub and SeedInvest, French and American websites providing crowdfunding services; Crowdfund.news, a website that provides useful information about crowdfunding; and some other websites, 7 factors play a key role in the success of fundraising projects, in which:

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 Detailed and clear description

 Value of the campaign

The table below shows some characteristics of the respondents:

Criteria Quantum Percentage Criteria Quantum Percentage

Ever invested

Never invested

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2.3 Case study method:

Successful Crowdfunding Project: Bird Buddy: A Smart Bird Feeder

Bird Buddy is a smart bird feeder app that notifies users of feathered visitors, captures their photos, and feeds them This innovation can also contribute extremely important information to the database of birds’ species, population, and migration that helps scientists better understand and protect them

During the 57-day fundraising period, the fundraising target amount reached 83.803%

and was sponsored by 22.925 people.

In the Kickstarters platform, Bird Buddy has provided a series of extremely detailed information about the project including a brief description of the project, a user manual in text and video with eye-catching animations, and the advantages of the project (e.g: using AI technology to identify birds and remember their eating habits, take pictures of birds, etc.) In addition, there is detailed information about the types of rewards that backers receive when investing in the project, which is an incentive for backers because it is of the reward-based type The project also has information about the goal, timeline, and purpose of fundraising (what the investment money is used for) Besides, the project also brings value in many aspects: spiritual value for bird lovers and for those who are given as a gift (product can be customized as a gift), environmental value - using objects that are sustainable, and scientific value - support experts in keeping a database of migrations and population for research and protection purposes) The project also created bird blogs as a way of marketing on SNS and websites.

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Thus, Bird Buddy is not a completely new idea, but it has creativity compared to previous projects and it builds backers’ trust through a methodical plan in terms of vision and benefits it brings.

Failed Crowdfunding Project: Virtual Jesus Virtual Jesus is a platform for conversations about life, love, hope, and peace that are

centered on the message of the biblical Jesus

The project has 7 days left to call for capital, but there are only 2 backers, and the invested amount accounts for 0.53% of the goal.

Contrary to the Bird Buddy project, Virtual Jesus does not have specific information when the project information section is mostly devoted to telling the story of the 2 founders instead of focusing on the description of the project and necessary information However, the project information section can show the value of the project to a specific community of people who have faith in God In addition, the information section other than a brief

description of the project and information about fundraising goals and deadlines does not have a timeline, demo of how the application works, and what the investment money will be used for Moreover, there are no really attractive and practical rewards or incentives to motivate backers This project also has no profit potential as people of true faith will choose religious sites instead of downloading apps This project also does not have marketing forms

to promote and attract backers.

In general, this is a project with a rather special idea, but it lacks too many attractive factors for investors and the applicability is not high, so it leads to failure.

Conclusion:

The two campaigns both are technology projects and both are reward-based campaigns However, the Bird Buddy project was successful thanks to the elements of detailed & clear information, incentives, value, an attractive marketing campaign, and creative innovation Meanwhile, Virtual Jesus, in addition to being a unique project, does not have the elements to create trust and investment motivation of backers.

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FINDING AND ANALYSIS

1 Real state of crowding funding in Vietnam

In recent years, the Vietnamese market has come up with a unique form of capital mobilization called Crowdfunding, roughly translated as capital mobilized from the community or sponsored by the crowd This is a form of capital mobilization that had developed in other countries for many years before being introduced into Vietnam In addition to the main purpose of getting funding, crowdfunding helps introduce ideas to most

of the public Crowdfunding is not only a source for raising funds from a larger community but also a possibility for Start-Ups to see if their project is well perceived Even though crowdfunding in Vietnam is not that common yet in comparison to many Western countries,

it is showing growth and is emerging as a new trend.

Crowdfunding is not common in Vietnam Due to cultural differences between the West and the East and different perceptions of failures, crowdfunding is not the platform where people are willing to share their ideas and call on capital because they are afraid of being denigrated instead of being supported In a business environment that focuses on relationships like in Vietnam, investing in a stranger on the internet is not easy at all.

Moreover, the limiting of online transactions and the legal system that doesn’t specifically regulate crowdfunding are major obstacles

However, these problems cannot prevent crowdfunding from developing in Vietnam.

In contrast, in the last three years, many crowdfunding web platforms have emerged and gained a great deal of trust from the Vietnamese community, for example, FirstStep, Comicola, Fundstart, Charity Map, FundingVN, etc Each of the crowdfunding web platforms in Vietnam has its unique strengths:

 Funding Vietnam which was set up in 2015 is the only reputable and unique

crowdfunding platform in Vietnam today It is designed for innovative start-up projects with the desire to bring products to customers to help connect projects with businesses, investors, and a community of supporters and bring projects to customers The Vietnamese project is meaningful to the community and the world.

Tiêu đề	The Elements Leading To Successful Crowdfunding Campaign And Application In Vietnam
Tác giả	Pham Tuan Anh, Nguyen Thi Minh Chau, Nguyen Ngoc Ha My, Nguyen Ngoc Quynh Tram, Le Hoang Yen
Người hướng dẫn	Nguyen Thuy Anh
Trường học	Foreign Trade University
Chuyên ngành	Financial Management
Thể loại	Report
Năm xuất bản	2022
Thành phố	Hanoi

Định dạng
Số trang	71
Dung lượng	512,68 KB

Tài liệu tham khảo	Loại	Chi tiết
1. KissKissBankBank. 2022. KissKissBankBank - crowdfunding platform for all your projects — KissKissBankBank. [online] Available at:<https://www.kisskissbankbank.com/en?fbclid=IwAR3cFPdxPMsKd2LDdwXEOOVBd94KIupRRBehv604EZ0hXxcrKq_hjhgMKAQ> [Accessed 18 September 2022]	Khác
2. Management, I. and GOYAU, A., 2022. 3 key crowdfunding success factors - IÉSEG. [online] IÉSEG. Available at: <https://www.ieseg.fr/en/news/key-crowdfunding-success-factors/?fbclid=IwAR1DS8k4IIf1--G6AQZvF9ZAJNAg-t4VPY5dpZeox_R6EBk2HYuP8wUPJGo> [Accessed 18 September 2022]	Khác
3. Mekong ASEAN. 2022. Gọi vốn cộng đồng (Crowdfunding) và tiềm năng tại Việt Nam. [online] Available at: <https://mekongasean.vn/goi-von-cong-dong-crowdfunding-va-tiem-nang-tai-viet-nam-post791.html> [Accessed 18 September 2022]	Khác
5. Kickstarter.com. 2022. [online] Available at: <https://www.kickstarter.com/projects/virtual-jesus/virtual-jesus?ref=discovery_category> [Accessed 18 September 2022]	Khác
6. Lapphap.vn. 2022. Xây dựng pháp luật về hoạt động gọi vốn cộng đồng. [online] Available at: <http://lapphap.vn/Pages/tintuc/tinchitiet.aspx?tintucid=207987&gt	Khác