Crowdfunding for Chinese Social and Environmental Small and Growing Businesses: An Investigation of the Feasibility of using U.S.-Based Crowdfunding Platforms

Abstract

Background China’s “open door” policy transformed the country’s economy, but at a social and environmental cost. Chinese Social and Environmental (SE) Small and Growing Businesses (SGBs) can help China face these challenges through economic development, poverty alleviation, and environmental benefits. Yet Chinese SE SGBs are limited by their lack of finance. Crowdfunding, soliciting small amounts of funding from many people, provides an alternative to traditional finance. Currently, the Asian crowdfunding industry is small relative to that of the U.S. Chinese SE SGBs may find that using U.S.-based crowdfunding platforms can generate more funding especially if they target Chinese diaspora and the SE community. The China Impact Fund (CIF) is investigating whether crowdfunding is a viable financing option.

Research Question Is it feasible for Chinese SE SGBs to use U.S.-based crowdfunding platforms to gain access to financing?

Research Strategy My research project assists CIF in assessing the feasibility of Chinese SE SGBs to use U.S.-based crowdfunding platforms. I break feasibility into three key research components:

1. Accessibility to U.S.-based crowdfunding platforms. 2. Burden (Time) of crowdfunding. 3. Funding received.

The Accessibility benchmark and either the Burden or Funding must pass for the research question to be “feasible”. Chinese SE SGBs must be able to access U.S-based crowdfunding platforms. However, Chinese SE SGBs may find it worth the extra time burden to obtain financing, or find the time burden reasonable even if they obtain less than the desired amount of funding. I establish benchmarks for the components and create within each several indicators. I determine indicator value by gathering data from primary and secondary sources including interviews, websites, industry reports and journal articles.

Results and Crowdfunding Lessons Results suggest that it is feasible for Chinese SE SGBs to use U.S.-based crowdfunding platforms. Many platforms allow international campaigns. Based on information from interviews and other sources, participation by internationals did not impose an overly burdensome fee or time commitment in comparison to U.S. campaigner experiences. However, the percentage of Chinese SE SGB campaigners that reached their funding goal was smaller compared to U.S. campaigners. My research and interviews provides Chinese SE SGBs with several applicable lessons to their crowdfunding campaigns.

1. Personal and professional networks play a powerful role in crowdfunding. Many interviewees expressed heavy reliance on their networks to get immediate funding, word-of-mouth marketing, and presence in the crowdfunding market. Chinese SE SGBs can ask their U.S. contacts to help navigate the U.S. marketplace and identify cultural expectations.

2. Campaigns should have a consistent, clear and strategic marketing plan. Concurrent with having a strong professional and personal network, marketing contributes to campaign success by publicizing the crowdfunding campaigns and the organization behind it.

3. Chinese SE SGBs should carefully decide how to position their campaign. Funders can be viewed either as customers that “pre-order” campaign rewards, or as supporters of a communal and charitable purpose. Chinese SE SGBs will need to think cautiously since their decision may affect future campaigns and business transactions.

4. Crowdfunding is generally a high time commitment with no guarantee of success. Chinese SE SGBs that crowdfund should be prepared for a possible time commitment of a year or longer devoting between 1-17 hours a day to sustain the campaign.