Crowdfunding for building digital goods: Why post-release plans should matter to developers and prospective backers
- Adaptation Information Management and Technology
Digital goods, such as search engines, online encyclopaedias, and mobile apps are the backbone of today’s businesses and society. Reward-based crowdfunding (where money is raised online from many people each contributing a small amount) has enabled developers, especially those with unconventional proposals, to finance their ideas for building digital goods.
Previous research has focused on how developers create and perform in crowdfunding campaigns. Surprisingly, there is little research on how developers must also engage in ongoing activities after the first official release to maintain and advance their digital goods.
Such activities – called post-release activities – are critical because they focus on fixing bugs, addressing security concerns, developing new features and functionalities, and attracting finance to enable those developments. If post-release activities are neglected, outdated goods will not be able to adhere to the market’s changing demands, and they can quickly become vulnerable to ransomware attacks, malware, and data breaches. Subsequently, those outcomes risk developers' records of accomplishment, reputation, and future fundraising performance.
Despite these critical outcomes for developers and end users, extant research pays little attention to post-release activities for sustaining crowdfunding development initiatives.
Against these backdrops, I conducted a longitudinal study arguing that the complex nature of post-release activities could be partly handled if developers engage in meticulous communication to clarify some aspects of their post-release plans and prepare backers for changes. The study asks: How can crowdfunding development initiatives communicate their post-release plans to prepare backers for changes and maintain backers’ satisfaction with their investment?
This question is, however, puzzling and requires in-depth exploratory analysis. The reason is that although developers can plan for post-release activities, the future is unpredictable, and those plans often need to change. Significant changes can risk backers’ satisfaction, which can result in them losing their trust in developers’ fundraising calls. Since crowdfunding occurs in the public domain, unhappy backers share their experiences, harming developers’ track records and initiatives. Without the crowd’s support, developers would struggle to sustain their digital goods.
Using a grounded theory development approach, I conducted an in-depth analysis of two polar case studies from fundraising, to development, to post-release – Project 1 (P1), building an open-source blogging platform, and Project 2 (P2), building a next-generation website tool.
Both P1 and P2 leveraged Kickstarter and raised impressive fundraising and development performance. P1 developers received £ 196,362 from 5,236 backers, and P2 developers raised $275,000 with support from 2,752 backers. Following intense development processes, they successfully released their products to the crowd.
However, P1 and P2 had contrasting post-release outcomes. P1 developers continued to advance the platform with the help of the crowd. P1 backers remained positive and contributed to the developers’ post-release activities. Today, P1 remains a trustworthy and promising example of crowdfunding for open-source development. In contrast, P2 developers rebranded and sold their product to a design company, and contrary to their earlier promises, they eventually announced a decision to discontinue supporting P2. Subsequently, P2 backers and the broader user community raised critical concerns and lost faith in the product’s future.
The findings suggest that P1 and P2 backers did not judge the crowdfunding initiative based solely on the developers’ impressive fundraising or development results. Instead, they demonstrated concern and enthusiasm about how the projects progressed over time. While P1 backers contributed to the platform’s ongoing releases, P2 backers participated in conversations about the consequences of the digital good rebranding and a third-party's acquisition.
These findings indicate that post-release outcomes are central to backers' long-term satisfaction with a crowdfunding development initiative, challenging much of the existing literature on fundraising success.
I leveraged the comparative findings and extant research to formulate insights on how crowdfunding development initiatives can communicate post-release plans to seed longer-term benefits for developers, backers, and the industry.
1. Communicating post-release plans
During fundraising, developers share content and demonstrate behaviours that signal if they (1) plan to earn capital and fund post-release developments (business signals), (2) have a roadmap or a list of technical ideas for advancing their digital goods (technical signals), and (3) intend to collaborate with backers, users, and the larger community after the official release (collaboration signals).
During development, developers share content and demonstrate behaviours that signal if they (1) made progress in their plans toward funding post-release advancements (business signals), (2) created a roadmap for post-release activities (technical signals), and (3) planned to expand and deepen engagement with backers, users, and the larger community after the official release (collaboration signals).
Some developers make explicit commitments and others make no explicit commitments regarding post-release plans.
These signals can be found in their progress updates, comments, reward structure, and developers’ behaviours in response to post-release questions (engaging versus silence).
2. Signalling through reward structures
Reward structures are critical outlets for signalling post-release technical and community plans.
(An example of a reward structure may be where backers can contribute a small amount of money (the lowest tier) and in return get first access to the product/service before going on general release; or contributing somewhere mid-tier may give the backer a chance to offer feedback on the product/service as well as timely access; and the highest tier may give the backer sponsorship opportunities and/or the chance to develop aspects of the product/service.)
Examples of signalling about post-release plans in reward structures are:
Stretch goals (secondary goals put in place if the original target has been reached) planned for the post-release stage commit developers to advance their work through future releases.
Rewards that promise backers the opportunity to participate in future releases signify the developers’ intention to remain connected to the crowd and sustain their digital good.
Reward structures prioritising large numbers of globally distributed backers signal the developers’ enthusiasm to expand their initiative’s boundaries.
3. High-cost signals and engagement
When developers give an update or engage with their backers, they are sending signals that can be considered “high-cost” or “low-cost” to the developer.
High-cost signals may increase engagement with backers and encourage fundraising performance, but they run the risk of creating dissatisfaction with the backers if they can’t fulfil their promises or need to make too many changes. This can have significant repercussions and damage the developers’ reputations. In contrast, low-cost signals convey limited claims and promises about post-release plans. Hence, if developers’ circumstances and post-release activities change, they do not risk backers’ satisfaction.
Although this suggests that low-cost signals are the safer option, backers in crowdfunding initiatives often feel a strong sense of ownership and value transparent communication.
Crowdfunding development initiatives that complement high-cost post-release signals with engaging backers in follow-up conversations about post-release issues are more likely to prepare backers for essential changes to post-release plans and maintain backers’ satisfaction after the official release. They are also more likely to be able to build new capabilities to fulfil those plans.
4. Contributing to a larger narrative: public perceptions about crowdfunding
Backers' satisfaction with post-release activities contributes to a larger narrative around how the public perceives the promise of crowdfunding for building digital goods. Initiatives that have delivered their promises over extended periods exemplify stories of resilience, reminding the public of what crowdfunding success could mean for independent developers and the community.
In contrast, initiatives that have failed to sustain backers' satisfaction after the official release cool public interest, creating an overall impression that crowdfunding might provide a false promise of long-term community and collaboration. They are also more likely to be able to build new capabilities to fulfil those plans.
Developers need to plan carefully to communicate their post-release plans. While different approaches can help them achieve short-term fundraising success, they benefit in the long run by combining high-cost signalling with engaging backers in follow-up conversations about post-release issues.
During fundraising, prospective backers are perfectly positioned to encourage developers to articulate their plans. Their encouragement contributes to constructive dialogues and a promising trend where developers are better prepared to stretch and strive for sustainable outcomes.
Together, developers and backers can create richer conversations and a stronger foundation for achieving better post-release outcomes, creating sustainable digital goods, and maintaining the much-needed trust in the industry.
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