Crowdfunding
Crowdfunding is the practice of funding a project or venture by raising money from a large number of people, typically via the internet.[1][2] Crowdfunding is a form of crowdsourcing and alternative finance. In 2015, over US$34 billion was raised worldwide by crowdfunding.[3]
Although similar concepts can also be executed through mail-order subscriptions, benefit events, and other methods, the term crowdfunding refers to internet-mediated registries.[4] This modern crowdfunding model is generally based on three types of actors – the project initiator who proposes the idea or project to be funded, individuals or groups who support the idea, and a moderating organization (the "platform") that brings the parties together to launch the idea.[5]
Crowdfunding has been used to fund a wide range of for-profit entrepreneurial ventures such as artistic and creative projects,[6] medical expenses, travel, and community-oriented social entrepreneurship projects.[7] Although crowdfunding has been suggested to be highly linked to sustainability, empirical validation has shown that sustainability plays only a fractional role in crowdfunding.[8] Its use has also been criticized for funding quackery, especially costly and fraudulent cancer treatments.[9][10][11][12]
Role[edit]
The inputs of the individuals in the crowd trigger the crowdfunding process and influence the ultimate value of the offerings or outcomes of the process. Individuals act as agents of the offering, selecting, and promoting of the projects in which they believe. They sometimes play a donor role oriented towards providing help on social projects. In some cases, they become shareholders and contribute to the development and growth of the offering. Individuals disseminate information about projects they support in their online communities, generating further support (promoters).
The motivation for consumer participation stems from the feeling of being at least partly responsible for the success of others people's initiatives (desire for patronage), striving to be a part of a communal social initiative (desire for social participation), and seeking a payoff from monetary contributions (desire for investment).[5] Additionally, individuals participate in crowdfunding to see new products before the public. Early access often allows funders to participate more directly in the development of the product. Crowdfunding is also particularly attractive to funders who are family and friends of a creator. It helps to mediate the terms of their financial agreement and manage each group's expectations for the project.[16]
An individual who takes part in crowdfunding initiatives tends to have several distinct traits – innovative orientation, which stimulates the desire to try new modes of interacting with firms and other consumers; social identification with the content, cause, or project selected for funding, which sparks the desire to be a part of the initiative; and (monetary) exploitation, which motivates the individual to participate by expecting a payoff.[5] Crowdfunding platforms are motivated to generate income by drawing worthwhile projects and generous funders. These sites also seek widespread public attention for their projects and platform.[16]
Crowdfunding websites helped companies and individuals worldwide raise US$89 million from members of the public in 2010, $1.47 billion in 2011, and $2.66 billion in 2012 — $1.6 billion of the 2012 amount was raised in North America.[57]
Crowdfunding is expected to reach US$1 trillion in 2025.[58] A May 2014 report, released by the United Kingdom-based The Crowdfunding Centre and titled "The State of the Crowdfunding Nation", presented data showing that during March 2014, more than US$60,000 were raised on an hourly basis via global crowdfunding initiatives. Also during this period, 442 crowdfunding campaigns were launched globally on a daily basis.[32]
The future growth potential of crowdfunding platforms also depends on their financing volume with venture capital. Between January 2017 and April 2020 globally 99 venture capital financing rounds for crowdfunding platforms took place with more than half a billion USD of total money raised. The median amount per venture capital financing rounds for crowdfunding was $5 million in the U.S. and $1.5 million in Europe between January 2017 and April 2020.[59]
Significant campaigns[edit]
Crowdfunding for Statue of Liberty[edit]
In the summer of 1885, crowdfunding averted a crisis that threatened the completion of the Statue of Liberty. Construction of the statue's pedestal stalled due to a lack of financing. Fundraising efforts for the project fell short of the necessary amount by more than a third. New York Governor Grover Cleveland refused to appropriate city funds for the project, and Congress could not agree on a funding package.
Recognizing the social and symbolic significance of the statue, publisher Joseph Pulitzer came to the rescue by launching a five-month fundraising campaign in his newspaper The World. The paper solicited contributions by publishing articles that appealed to the emotions of New Yorkers. Donations of all sizes poured in, ranging from $0.15 to $250. More than 160,000 people across America gave, including businessmen, waiters, children, and politicians. The paper chronicled each donation, published letters from contributors on the front page, and kept a running tally of funds raised.
The campaign raised over $100,000 (roughly $2 million today) allowing the city to complete construction of the pedestal. Pulitzer and The World simultaneously saved the Statue of Liberty and gave birth to crowdfunding in American politics.
Crowdfunding for Cairo University
The Egyptian national leader, Mustafa Kamel, launched an initiative for public subscription in favor of establishing the first Egyptian university, and published an advertisement in Al-Ahram newspaper in October 1906 calling on Egyptians to fulfill the nation's debt and not procrastinate with it. Indeed, many people including school children rushed to donate, and the patriots encouraged this subscription until donations exceeded 4,400 Egyptian pounds.
The National University was opened on December 21, 1908, in a large ceremony in the hall of the Shura Council of Laws, in the presence of Khedive Abbas II and senior statesmen and notables. Its director was the politician and writer Ahmed Lutfi al-Sayyid while the chairman of its board of directors was King Fouad the first. In 1953 the National University changed its name to Cairo University.
Early campaigns[edit]
Marillion started crowdfunding in 1997. Fans of the British rock band raised $60,000 (£39,000) via the internet to help finance a North American tour.[65][66] The Professional Contractors Group, a trade body representing freelancers in the UK, raised £100,000 over a two-week period in 1999[67] from some 2000 freelancers threatened by a government measure known as IR35. In 2003, jazz composer Maria Schneider (musician) launched the first crowdfunding campaign on ArtistShare for a new recording.[68] The recording was funded by her fans and became the first recording in history to win a Grammy Award without being available in retail stores.
Oliver Twisted (Erik Estrada, Karen Black) was an early crowdfunded film.[69] Subscribers of The Blue Sheet formed The Florida Film Investment Co (FFI) in January 1995, and started selling shares of stock at $10 a share to fund the $80,000 – $100,000 film. The Movie was filmed in Oct 1996. The film was distributed by RGH/Lion's Shares Pictures.[70]
In 2004, Electric Eel Shock, a Japanese rock band, raised £10,000 from 100 fans (the Samurai 100) by offering them a lifetime membership on the band's guestlist.[71] Two years later, they became the fastest band to raise a US$50,000 budget on SellaBand.[72]
Franny Armstrong later created a donation system for her feature film The Age of Stupid.[73] Over five years, from June 2004 to June 2009 (release date), she raised £1,500,000.[74]
