Many companies transact their business processes online to enhance their effectiveness and productivity. The entire business concept of some enterprises is based on the worldwide data network. Also financial matters are more and more solved online. Bank customers are well informed by the Internet and willing to make use of different financial services of different providers simultaneously. This willingness is supported by the comparability of financial services in blogs, forums or social networks.
The services of traditional banks did not develop significantly during the last years. In contrast to this there are remarkable changes in macroeconomical, political and social surrounding conditions. Those affect the banks in a sustainable way and offer new competitors market access. Especially the availability of technology have an effect on the business activities of credit institutions, that transfer innovations only partial in turn. Simultaneously costumers show increasing experience and affinity with the handling of technology based financial services. Due to this they get a quick and easy access to information that is not available in analogue environment in that extent.
Crowdfinance has a great importance in this development. It is an alternative form of financing online, mostly for small to medium scale capital sums. Generally there is a project or business funded by a plurality of persons. The roots of crowdfinance are found in the generic category of crowdsourcing, which focus is on working with creative ideas and approaches of the crowd. Although the main features of crowdfinance go far back into the past, the subject matter moves closer into the public focus since only a few years. A reason for this popularity is amongst others the dispersion of social networks like Facebook, Twitter and innumerable blogs. By its ability to link the users among each other the Internet offers new and variegated possible applications to finance project ideas. In addition, the missing fulfilment of financing demand for small to medium scale capital sums1 as well as increasing uncertainness in international capital markets play a major role.
Table of Contents
1 Introduction
1.1 Problem Statement and Objective
1.2 Course of Analysis
2 Conceptual Delineation
2.1 From Crowdsourcing to Crowdfinance
2.2 The Crowd
2.3 Crowdfinance
3 Crowdfinance – A Corporate Finance Alternative?
3.1 Theory of Financial Intermediation
3.2 Monetary Recognition
3.2.1 Crowdinvesting (equity-based crowdfunding)
3.2.1.1 Definition
3.2.1.2 Crowdinvesting by using the Example of Seedmatch
3.2.1.3 Chances of Crowdinvesting for Founder and Investor
3.2.1.4 Risks of Crowdinvesting for Founder and Investor
3.2.2 Crowdlending (lending-based crowdfunding)
3.2.2.1 Definition
3.2.2.2 Crowdlending by using the Example of Auxmoney
3.2.2.3 Chances of Crowdlending for Founder and Investor
3.2.2.4 Risks of Crowdlending for Founder and Investor
3.3 Non-monetary Recognition
3.3.1 Crowdsupporting (reward-based crowdfunding)
3.3.1.1 Definiton
3.3.1.2 Crowdsupporting by using the Example of Startnext
3.3.1.3 Chances of Crowdsupporting for Founder and Investor
3.3.1.4 Risks of Crowdsupporting for Founder and Investor
3.3.2 Crowddonation (donation-based crowdfunding)
3.3.2.1 Definition
3.3.2.2 Crowddonation by using the Example of Betterplace.org
3.3.2.3 Chances of Crowddonation for Founder and Investor
3.3.2.4 Risks of Crowddonation for Founder and Investor
3.4 Factors Influencing the Use of Crowdfinance
3.5 Critical Examination
4 Summary and Conclusion
Objectives and Research Focus
This paper explores the viability of crowdfinance as a comprehensive corporate finance alternative rather than a mere supplementary funding source, particularly for start-ups and small-to-medium-sized enterprises.
- Conceptual definition and categorization of crowdfinance types.
- Comparative analysis of monetary (crowdinvesting, crowdlending) and non-monetary (crowdsupporting, crowddonation) models.
- Examination of specific platform examples like Seedmatch, Auxmoney, Startnext, and Betterplace.org.
- Identification of risks and opportunities for both founders and investors.
- Evaluation of factors influencing the adoption of crowdfinance in corporate structures.
Excerpt from the Book
3.2.1.3 Chances of Crowdinvesting for Founder and Investor
The main reason for a founder to use crowdinvesting is the current situation on the financial markets. It is hard, especially in the founding phase, to receive credits the “old-fashioned” way, by asking your bank. The other most important reason for using crowdinvesting is the fact that you can get many interesting new ideas and the knowledge from all your investors to push your start-up into the right direction.
Other important aspects that need to be mentioned are the mobilisation of the masses and the multiplier effect. The higher the activity in social media and the higher the awareness level of the platform, the higher is the potential to find investors for the individual start-up. It is not just that the masses will be lenders of capital, they can also form a potential new target market. A study of McKinsey showed that the per capita sales of companies that are more active in social networks or platforms like Seedmatch is higher than the per capita of those companies who do not actively participate in social media.
Main reasons for investors to use crowdinvesting are the wide distribution of risks and the low transaction costs. They can invest way smaller amounts of money in different start-up companies that raise their interest. Another reason is that there are less market limitations than in the traditional way.
Summary of Chapters
1 Introduction: This chapter highlights the shift towards online business processes and introduces crowdfinance as an alternative funding method for small-to-medium capital needs.
2 Conceptual Delineation: It defines the theoretical scope of crowdsourcing and explains the crowd’s role and motivations within the crowdfinance ecosystem.
3 Crowdfinance – A Corporate Finance Alternative?: This core chapter categorizes different models of crowdfinance (monetary vs. non-monetary) and analyzes them through industry examples and risk-benefit profiles.
4 Summary and Conclusion: This final chapter synthesizes findings, noting that while crowdfinance may not fully replace traditional finance, it serves as a viable and promising alternative for small businesses.
Keywords
Crowdfinance, Crowdsourcing, Crowdinvesting, Crowdlending, Crowdsupporting, Crowddonation, Start-up Financing, Seedmatch, Auxmoney, Startnext, Betterplace.org, Financial Intermediation, Corporate Finance, Venture Capital, Digital Economy
Frequently Asked Questions
What is the primary scope of this work?
The paper examines whether crowdfinance can function as a full-fledged alternative to traditional corporate financing methods rather than just an occasional addition.
What are the main categories of crowdfinance discussed?
The work distinguishes between monetary recognition (crowdinvesting and crowdlending) and non-monetary recognition (crowdsupporting and crowddonation).
What is the central research question?
The main research question is whether crowdfinance is suitable as a primary financing alternative for start-ups and businesses, considering the challenges they face with traditional institutions.
Which methodology is employed in this research?
The paper uses a theoretical conceptualization followed by an analytical "snap-reading" method, examining selected leading platforms to evaluate the practical relevance and specific characteristics of each crowdfinance model.
What topics are covered in the main section of the paper?
The main section covers the theory of financial intermediation, detailed analyses of four crowdfinance types with real-world examples, and the critical factors that influence the choice of a financing strategy.
Which keywords best describe the focus of this study?
The study is characterized by terms such as Crowdfinance, Crowdinvesting, Crowdlending, Start-up Financing, and Financial Intermediation.
How does the regulation in the US, specifically the JOBS Act, differ from the German model for crowdinvesting?
The US CROWDFUND Act provides specific thresholds based on income and net worth for investors to enter public capital markets, while the German model relies on contractual structures often characterized as mezzanine-finance.
What unique selling proposition does Startnext claim in terms of transaction costs?
Startnext claims to be the only platform worldwide that does not charge transaction costs, as all payment systems are offered free of charge.
What is the "Web of Trust" (WoT) in the context of Betterplace.org?
The WoT is a mechanism for transparency where various actors provide reports and feedback on projects to ensure accountability and build trust among potential donors.
What risk does the author identify as "greenwashing" in the context of crowddonation?
Greenwashing refers to marketing or PR actions where a company creates a false environmentally friendly or socially responsible image by using small donations, without truly addressing the underlying social issues.
- Arbeit zitieren
- Anonym (Autor:in), 2014, Crowdfinance in Context of Corporate Finance, München, GRIN Verlag, https://www.grin.com/document/349771
