Crowdfunding in Europe

Crowdfunding is increasingly gaining attention in theory and practice. Various platforms have emerged, offering entrepreneurs and project owners the possibility to raise money from an undefined group of online users (“crowd”). In this article we aim to provide a deeper understanding of the rise of crowdfunding as an alternative funding opportunity by discussing its main characteristics, the market development, different classification approaches, its fields of application and by providing directions for future research.

Crowdfunding has become important in recent years. However, there is no comprehensive overview of the economic literature on this topic. This paper provides an overview of crowdfunding literature, classified in terms of the main actors (capital seekers, capital providers, and intermediaries), and presents important research questions for future research.

In its early stages, research on crowdfunding focused primarily on the inside perspective of the phenomenon. The following article introduces a more comprehensive perspective, exploring the relevance of crowdfunding for society. With respect to the consequences of the financial crisis and societal challenges, the article outlines a research programme that contributes to the potential of crowdfunding on a societal level that can be explored from a media and communication science perspective and theory of financial intermediaries.

Equity-based crowdfunding is a relatively new method to obtain capital for start-ups. Hereby ventures use special Internet platforms to issue shares of different sorts to the public. However, a great variety of platforms exist, which leads us to the question of whether there is a general crowdfunding process enabling founders to finance their business or not. If we knew of a general model, we could give recommendations to founders, service providers and investors. Therefore, in this article, we analyse the process of equity-based crowdfunding from the perspective of a capital seeker and ask how the process of equity-based crowdfunding is structured in practice. We answer this question by conducting an explorative analysis consisting of an iterative examination of the 16 different platforms existing in Germany. By doing so, we aim to identify commonalities and differences and derive a general model. The findings will be used for further discussion and provide information for stakeholders in order to optimize the process.

Emerging literature on crowdfunding, until now, is missing detailed empirical analyses on profiles of “crowdfunders”. Our paper aims to address this shortage, analyzing geographical and socio-economic characteristics of crowdfunders, looking at how crowdfunding influences the nature of geography and social contacts in new ventures. Our analysis concentrates on Italy, a country suffering for a huge economic crisis but that, at the same time, is showing a strong dynamism in crowdfunding. We collect data on donors of about 350 projects, estimating with a micro-econometric model not only which donors’ characteristics increase the likelihood of an investment, but also the role played by social media in the crowdfunding process. Our results give some remarkable indications about crowdfunding in different countries and cultural contexts.

This is the first attempt to measure the jobs created by projects funded through crowdfunding (crowd-jobs). This new economic way of financing is already a tangible economic reality made up of 452 active crowdfunding platforms worldwide, which have raised almost $5.1 billion and funded more than 1 million campaigns in 2013.

In Spain, a prototype of an economy in recession, crowdfunding platforms attracted 400 million euros and 2,825 crowdfunding projects in 2012. The funds raised by the successful projects (5,137,648 €) have created around 3,000 direct jobs (crowd-jobs), which represent just 1.61 % of the total target budget (success rate). One year later, the total target budget has decreased (332,145,063 €), however the funds raised by the successful projects have increased (8,526,094 €), especially in the Social and Cultural Sector, creating more crowd-jobs (5,635) and improving the success rate (2.57 %) in 2013.

Since the analysed period only spans 2 years (2012–2013), any conclusion is tentative. All in all, the results seem to suggest that the Spanish crowdfunding market is becoming more efficient, specialised and increasing solidarity, although, again, it is still too soon to consider these tendencies as consolidated patterns and any extrapolation of trends is premature. The economic crisis and the structure of the Spanish economy seem to be responsible for these tendencies, although the expansion of the crowdfunding market should also be considered as a tentative explanatory variable of the observed tendencies in Spain.

Venture capitalists and entrepreneurs all over the world have tried to imitate the success of Kickstarter, Indiegogo and other crowdfunding platforms. Russia has followed suit with the emergence of local platforms for raising capital online in 2010–2013. The moving forces behind this were an eagerness to copy a successful business model, existing language and legislative barriers and the potential capability to raise capital from strangers from afar that might be very important in such a vast country as Russia. However, given the performance of Russian platforms for non-equity-based crowdfunding it is evident that the success of local platforms largely depends on the characteristics of the national market and competition from international platforms. We provide a preliminary exploration of the underlying economics of Russian crowdfunding and its relationship with the international crowdfunding community. We offer a framework for speculating on how crowdfunding may unfold at national level and what the required conditions for its local development might be.

In the recently published World Bank Report on Crowdfunding [infoDev (Crowdfunding’s Potential for the Developing World (Report). World Bank, 2013)], China has been predicted to have great potential: By 2025, Chinese households might invest up to US$50 billion per year in crowdfunding projects. However, as the authors of this report have admitted, they based their approximation primarily on economic data, and thus China’s prospective amount of crowdfunding capital may actually be much lower. Not least for international crowdfunding platforms, the development of crowdfunding in the Chinese market is of considerable importance. This paper assesses the World Bank Report’s procedural methods and their applicability to China. Moreover, it addresses some mistakes and contradictions that underlie this report. Whilst the report’s findings provide a solid insight into crowdfunding’s potential for the entire developing world, some key variables used are not applicable to China and therefore adulterate the findings. The author of this paper suggests an extended study, which considers country-specific variables and circumstances.

More and more SMEs use crowdfunding to raise funds from a large audience by means of a cost-effective effort. Crowdfunding helps SMEs to overcome the demand for capital for early-stage (equity) financing. The traditional availability of financing, such as bank lending, venture capital and angel investments, are not available to most start-ups and other SMEs. Offerings are, thus, more and more promoted through crowdfunding portals. Funds through this channel of financing are typically raised from a larger number of contributors in the form of relatively small contributions. It is therefore very obvious that more and more firms have started to use this medium for this goal. Regulations on the national and European level, however, heavily limit mechanisms to promote offers and campaigns to a wide range of potential investors. In addition, company laws and banking and securities regulations hinder the emergence of an ecosystem with platforms that can offer the infrastructure for internet-based campaigns. This paper particularly explores these (mainly European) obstacles, and proposes remedies.

Investors strive for profit, but many are also socially responsible. They want to do their fair share, for example supporting the local community. Traditionally, they can donate money to charities. The rise of crowdfunding offers them another possibility to fulfil their social goals. They can directly back projects or give small low-interest loans to finance civic projects. This paper provides an example of how a socially responsible investor’s optimal portfolio changes when the possibility of supporting civic projects by the means of low-interest loans is introduced.

This paper sets out to deepen the understanding of crowdfunding campaigns, and investigates a hand-collected database of 500 projects taken from Kickstarter.com, the biggest crowdfunding website in terms of revenue. Through a logistic regression and mediation model, our study tries to explain which are the predictors that can help reaching the funding goal of a crowdfunding initiative.

Crowdfunding is a process by which enterprises or individuals seek to secure project funding by soliciting pledges from potential donors, usually via an Internet platform. These platforms offer project initiators the ability to limit the number of times a certain reward is claimed by supporters. This can be used to either offer a reward, which is naturally limited, or to induce an artificial scarcity for rewards without a natural limitation. The induction of such artificial limitations represents a signal which may, fundamentally, either have a positive or a negative effect on the crowdfunding project. To answer this question, this paper not only discusses the theoretical effects of scarcity management in the crowdfunding context, but also investigates this empirically. The analysis of 42,996 projects from Indiegogo.com indicates that current scarcity management is problematic at best and reduces the chances of projects to successfully achieve their target funding.

Often equity crowdfunding is just considered as a new viable method of financing beyond the traditional financial system. However, considering equity crowdfunding only within the financial sphere and as a financial innovation is very limiting and does not represent the reality. Equity crowdfunding innovation is not only a financial innovation; it encompasses many other features that make equity crowdfunding so innovative. The financial sphere is only a part of the innovation that interacts on different levels with other relevant features, thus creating synergies and a unique model.

The purpose of this article is to analyse the most relevant aspects of equity crowdfunding beyond the obvious financial sphere.

Many entrepreneurs or small and medium-sized enterprises (SMEs) are really dynamic, highly innovative and willing to bear the risk of innovative projects. However, a bottleneck for realising such projects is often both the lack of support from relevant know-how (could be solved by crowdsourcing), and risk capital (could be provided by crowdfunding). After introducing some aspects of innovation the crowdpower 2.0 concept will be explained, and insights and best practices of practical experience in Austria of a crowdsourcing and a crowdfunding platform will be presented. The overall aim of the crowdpower 2.0 concept is to foster the evolution of a new ecosystem for innovative SMEs and entrepreneurs by combining open innovation approaches with the latest crowd technologies.

Crowdfunding (CF) is emerging as a fairly potent tool of civil society by providing an alternative mode of financing outside traditional and formal systems for creative and innovative projects. In this article, the focus is on using CF for financing initial phases of a social enterprise (SE). The first part begins with a brief description of the CF phenomenon and its characteristics. Then, the positioning of CF in the context of traditional financing is discussed. Further, various factors that make CF a particularly relevant tool for providing the much needed start-up capital for an SE are enumerated. The first part ends with a short discussion on current regulatory issues for the CF industry in Germany and its implications for SEs. In the second part, a case study of the recently concluded CF campaign of the “GloW project” is taken up. This is a pilot phase of an SE called GloW Energy. The vision and the business model of this SE, which aims to pre-assemble energy-saving stoves locally and supply them to well-identified partners in developing countries, is presented. Details of the CF campaign and strategies employed are then given. Analysis of data from this CF campaign reveals a number of insights which are presented in detail. The positive role played by the coverage of the project both in traditional and social media is briefly discussed. Inferences from this study that indicate aspects, which might make CF a sustainable option for both SEs and the CF industry, are given.