Crowdfunding: Tapping the Right Crowd

Abstract

The basic idea of crowdfunding is to raise external finance from a large audience (the "crowd"), where each individual provides a very small amount, instead of soliciting a small group of sophisticated investors. The paper develops a model that associates crowdfunding with pre-ordering and price discrimination, and studies the conditions under which crowdfunding is preferred to traditional forms of external funding. Compared to traditional funding, crowdfunding has the advantage of offering an enhanced experience to some consumers and, thereby, of allowing the entrepreneur to practice menu pricing and extract a larger share of the consumer surplus; the disadvantage is that the entrepreneur is constrained in his/her choice of prices by the amount of capital that he/she needs to raise: the larger this amount, the more prices have to be twisted so as to attract a large number of "crowdfunders" who pre-order, and the less profitable the menu pricing scheme.

Online social networks as a catalyst for software and IT innovation

“…This could include identifying organizations, companies that might be willing to realize the idea or the use of crowdfunding platforms [1] to raise money for the realization. Another option could be that one of the group members decides to fund the realization of the idea herself.…”

Success Factors in Title III Equity Crowdfunding in the United States

“…There is an active stream of research exploring factors that affect the success of projects hosted on these platforms [22,31,32], however these studies do not necessarily yield useful insights for equity-based crowdfunding, because investor motivations for participation in equity-based crowdfunding platforms are very different from backers in rewards-based crowdfunding [5]. Equity investors are typically motivated by the expected gains in the value of their investments, as opposed to receiving a product or service from a rewards-based project.…”

Profitable Nonprofits? Reward-Based Crowdfunding in the Czech Republic

“…Pledgers may then contribute individual amounts of monetary or non-monetary resources, during a specifi ed timeframe, using offl ine or online cam-paign platforms that utilize diff erent pay-out schemes, in exchange for a product specifi c or unspecifi c, material or immaterial reward" (ibid., 6). Mollick (2014) argued that the problem with the defi nition by Bellefl amme et al (2014) lies in the fact that it may potentially omit certain fi elds that are covered by crowdfunding, for example peer-to-peer or equity lending. At the same time, he added that it is impossible to capture all aspects of crowdfunding.…”