Crowdfunding: Tapping the Right Crowd

Abstract

With crowdfunding, an entrepreneur raises external financing from a large audience (the "crowd"), in which each individual provides a very small amount, instead of soliciting a small group of sophisticated investors. This article compares two forms of crowdfunding: entrepreneurs solicit individuals either to pre-order the product or to advance a fixed amount of money in exchange for a share of future profits (or equity). In either case, we assume that "crowdfunders" enjoy "community benefits" that increase their utility. Using a unified model, we show that the entrepreneur prefers pre-ordering if the initial capital requirement is relatively small compared with market size and prefers profit sharing otherwise. Our conclusions have implications for managerial decisions in the early development stage of firms, when the entrepreneur needs to build a community of individuals with whom he or she must interact. We also offer extensions on the impact of quality uncertainty and information asymmetry.

Shared Value Creation and Crowdfunding in Brazil

“…The interest in this funding type arises in internal and external motivations of participants and the monetary compensation with benefits for the community. Lambert & Schwienbacher (2010) deepened the definition of Crowdsourcing developed by Kleemann, Voß, & Rieder (2008) and reported that the CF is an open invitation, primarily through the Internet, for provision of financial resources in the form of donation, reward, voting rights or similar initiatives.…”

“…Another measure could be the obligation of employers to more risky projects, to disclose more information about their business (Agrawal et al, 2013). Lambert & Schwienbacher (2010) pointed out that most of the initiatives in CF were from filmmakers and music producers. Today in Brazil, the CF platforms support a range of projects, such as: Architecture and Urbanism, Community, Education, Literature, Music, Sports, Social Business, Theatre, Science and Technology, among others.…”

Comparative Analysis Study of Selected Alternative Finance

“…The idea of the concept is similar to crowdfunding but it does not deal only with finance but with sharing ideas, feedbacks or solutions [3]. Even though crowdfunding is still a new phenomenon and it struggles with poor supply of adequate data, there are several studies discussing factors and conditions for its development available, e.g.…”

“…Entrepreneurs have now the option to combine traditional financial sources (e.g. personal saving, friends, family, bank loans) with newer types of finance sources (angel investors, venture capital, microfinance, crowdfunding or invoice trading) [28], [6].…”

Fair Play — Art, Performance and Neoliberalism

“…Given its success elsewhere (such as in the United States) and in other art forms (for example, music production) (see Belleflamme, Lambert and Schwienbacher, 2012), it seems likely that crowdfunding will grow as a source of theatre funding in the United Kingdom. In Ireland, for example, through the website Fundit (2012b), Landmark Productions and Galway Arts Festival secured over a16,000 in spring 2011 to patch the budget shortfall for their summer production of Enda Walsh's Misterman starring Cillian Murphy.…”