Abstract

Prior research has shown the financial importance of friends and family in new venture creation (e.g., Bates, 1996; Gartner, Frid, & Alexander 2012). Building on the premise that crowdfunding success is more likely when projects attract substantial amounts of money in the early days of a campaign (Agrawal et al., 2014), we turn to the question of whether friends and family are pivotal to acquiring capital through crowdfunding campaigns. Drawing on social network theory, we start by suggesting that because crowdfunding project founders are generally not allowed to back their own campaigns, initial spikes in funding likely originate from the founder’s family and friends. We then propose a moral-licensing explanation for the phenomenon of entrepreneurs’ inflation of the perceived popularity of their crowdfunding projects via (disapproved) self-backing. Thus, we offer a distinction between campaigns which are bolstered through offline networks and those which are supported entirely by the online crowd.

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