Crowdfunding is a new funding method through which founders request small amounts of funding from a large number of people through an online platform. Crowdfunding facilitates a new type of social capital and exhibits a unique form of social dynamics, thus attracting the interest of sociologists and other social scientists. Previous studies have focused on social relationships in crowdfunding such as direct reciprocity and consider how they contribute to the success of funding. The social structure of crowdfunding, however, involves more complex social relationships and it may contribute to the success of a new venture or project in many ways. In this study, we focus on a specific type of triadic social structure, the buddy relation, which can be described as a relationship through which project founder x, who previously backed another founder z's project, receives financial backing from the other backers of z's project. We found that the buddy relation occurs significantly more often than randomly, concluding that this structure facilitates the gathering of financial backing and may contribute to the success of a crowdfunded project.
Crowdfunding is a funding method through which founders, to realize their goals, request funds from crowd comprising many and unspecified individuals through an online platform. Crowdfunding sites are used for a variety of projects, such as video games, free software, inventions, scientific research, environmental initiatives, social welfare, and political activities. Founders make their own proposals in public on crowdfunding sites and ask backers to contribute a small amount of money. The founder sets up a target amount of funding and offers returns for their support such as products, thank you letters, or advertisements of backers' names as an acknowledgment. Individuals examine and compare proposals on the site. Those motivated select their favorite projects and decide the amount they want to pledge, and transfer money via micropayment. Finally, such backing expands via word of mouth on social networking services.
Backers have the following two types of motivation: extrinsic and intrinsic motivations. The former is based on returns, that is, self-interest, whereas the latter is based on sympathy toward founders [1]. For example, those motivated intrinsically see the feelings of “connectedness” to a community as precious, via participating social interactions [2].
The more attractive the proposal or return, the more fundraising is likely to be achieved. However, the major characteristic of crowdfunding is that new social capital emerges directly among people unknown to each other, and such social dynamics have attracted the interest of sociologists and other social scientists. Particularly, a large proportion of users in crowdfunding may interact with others not once but repeatedly; thus, their interactions form a type of social structure. Furthermore, present backers may become future founders and vice versa. This interdependent relationship creates the social dynamics of crowdfunding. For example, b’s previous experience of being backed by a may make b willing to back a this time; this is known as the reciprocity principle [3]. Social dynamics in crowdfunding, however, goes beyond simple reciprocity in crowdfunding, as discussed later in this study.
Previous studies on crowdfunding have mainly focused on factors contributing to funding success. They have examined the contents of a project and the way it is presented to identify elements that are crucial for success, such as the “goal” (the target amount of funding), “deadline,” “news updates” (frequency of news updates), “Facebook likes” (number of Facebook likes), and length of explanation. Meanwhile, typographical errors usually result in failure [4].
Among the characteristics of crowdfunding, particularly interesting are those related to its social capital. References [4], [5], [6], and [7] explored the effects of founders’ social capital on the success of a funding initiative. Reference [4] showed that the possibility of success is significantly correlated to the number of Facebook likes, which they regarded as a founder’s social capital. Reference [5] showed that success is correlated to the social capital inside the crowdfunding site. As for the inside capital, [6] showed that a founder who has received backing previously from many individuals is likely to be able to collect more backing for future initiatives. Reference [7] also showed that a founder who has backed many others is more likely to receive more backing. Particularly, [7] have confirmed that direct reciprocity between founders exists in crowdfunding sites. As a related work, [8] showed that there is no indirect reciprocity among founders.
These studies shed light on the important mechanisms of social capital that make it possible to fundraise through crowdfunding sites. However, they do not show a more complex social structure than a dyad such as direct reciprocity (however, see [8] and the discussion). In this study, we explore such a social structure and its dynamics.
The questions explored in this study include the following: Why do backers back certain founders and not others? What is the effect of backing? How does previous backing by present founders contribute to gathering funds and thus the success of their projects?
The act of backing can be considered as the emergence of a direct tie between a backer and a founder. Thus, the backingbacked relationship forms a type of social network in crowdfunding sites. The network dynamics can be analyzed through social network theory [9] [10] [11] [12].
One of the most common theories is the theory of reciprocity; that is, if your project was backed by someone previously, then you should back her if she is seeking funding for her project. In fact, [7] showed the existence of direct reciprocity. However, direct reciprocity cannot be seen as the major dynamics because the number of founders is very less when compared to backers. Other mechanisms should be considered.
In social network theory, there are other candidates of mechanis
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