A good idea for a product or service is often not enough to start a business. Especially at the beginning of starting a business financial resources are needed to invest into the necessary equipment and materials.
But not only new companies, so called startups, but also small and medium enterprises (SMEs) are in need of new capital for expanding their product range or for new product developments which cannot always be obtained from the bank or from the stock market.
Bank financing plays an important role in Germany. However, in 2008 about 35% of German companies complain about problems in credit financing and access to credits, especially small enterprises with an annual turnover to EUR 1 million and large enterprises of more than EUR 50 million.
The decline in lending can also be seen from the fact that banks are increasingly taking more money for loan repayments from companies than to forgive new loans.
This indicates that lending is difficult. Companies therefore have to seek alternative sources of funding. One of several financing alternatives is crowdfunding. This type of financing is subject to this term paper.
Crowdfunding is a project-based form of financing the above mentioned case examples, by which capital from a plurality of donors within a predetermined period of time is raised.
Table of Contents
1 Introduction
1.1 Objective
1.2 Structure
2 Definitions and conceptual delimitations
2.1 Crowdfunding platforms
2.2 The crowdfunding process
3 Crowdfunding as a source of finance
3.1 Crowdsupporting
3.2 Crowdinvesting
3.3 Crowdlending
3.4 Crowddonating
4 Conclusion and Outlook
Objectives and Core Topics
This paper examines crowdfunding as a viable alternative financing source for startups and SMEs, particularly in light of increasing challenges regarding traditional bank credit accessibility in Germany. It analyzes the conceptual foundations, operational processes, and distinct categories of crowdfunding to determine how it can serve as a value-creating tool for business models.
- Evolution and significance of crowdfunding as a financial instrument
- Taxonomy of crowdfunding types (Crowdsupporting, Crowdinvesting, Crowdlending, Crowddonating)
- Mechanisms and operational stages of the crowdfunding process
- Comparative analysis of traditional bank financing versus crowdfunding
- Analysis of market trends and the impact on contemporary business models
Excerpt from the Book
2 Definitions and conceptual delimitations
Crowdfunding is a subfield of Crowdsourcing. Crowdsourcing is used to when a company or an individual wants to get as many and different ideas and solutions to a specifically described problem. For this purpose the problem is broadcasted to a large number of people, the crowd. Crowdfunding describes the support of a project or company by the crowd in financial and non-financial terms and has its roots in the concept of crowdsourcing.
„Remember outsourcing? Sending jobs to India and China is so 2003. The new pool of cheap labor: everyday people using their spare cycles to create content, solve problems, even do corporate R & D.“
Crowdfunding is a composition of the words Crowd and funding. Whereas funding means to provide money for a company for a special purpose, crowd means a large number of people. The crowd come together to achieve a common goal.
Summary of Chapters
1 Introduction: Provides context for the growing importance of crowdfunding as a response to financing difficulties faced by startups and SMEs in Germany.
2 Definitions and conceptual delimitations: Establishes the theoretical link between crowdsourcing and crowdfunding while outlining the general process of project funding.
3 Crowdfunding as a source of finance: Details and distinguishes the four primary models of crowdfunding: support, investment, lending, and donation.
4 Conclusion and Outlook: Synthesizes the findings and discusses the future role of crowdfunding as a permanent feature of the modern financing landscape.
Keywords
Crowdfunding, Crowdsourcing, Startups, SMEs, Finance, Investment, P2P-Lending, Crowdsupporting, Crowdinvesting, Crowddonating, Bank Financing, Capital, Digital Economy, Business Models, Web Platforms
Frequently Asked Questions
What is the fundamental focus of this paper?
The paper explores crowdfunding as a strategic alternative to traditional banking for companies seeking capital, analyzing its structure and various implementation models.
What are the primary thematic areas covered?
The core themes include the definition and classification of crowdfunding, the operational process of funding, and a comparative study of the different types of crowd-based financing.
What is the primary objective of this research?
The research aims to identify the challenges and opportunities of international crowdfunding, assessing its impact on business models and its potential for value creation.
Which scientific methodology is employed?
The study utilizes a descriptive and analytical approach, synthesizing existing literature, statistics on capital development, and structural frameworks to analyze the crowdfunding phenomenon.
What topics are discussed in the main body?
The main body breaks down the concept of crowdfunding by defining its relationship to crowdsourcing, detailing the crowdfunding lifecycle, and providing a deep dive into four distinct types of crowdfunding.
Which keywords characterize this work?
Key terms include crowdfunding, crowdsourcing, startups, finance, equity, lending, and digital business models.
How does the "all or nothing" principle function in the crowdfunding process?
In this model, project initiators only receive capital if their specified financial target is reached within the set timeframe; otherwise, no funding is transferred and supporters are not charged.
What differentiates Crowdlending from Crowdinvesting?
Crowdlending functions as a debt-based instrument with a fixed interest rate and no shareholder rights, whereas Crowdinvesting provides the investor with equity, dividends, and participation rights.
How does the author characterize the future of banking in relation to crowdfunding?
The author suggests that if the trend toward crowdfunding continues to rise, banks may need to develop new business models to remain competitive, especially in low-interest environments.
- Quote paper
- Malik Dakdaki (Author), 2016, Crowdfunding as a source of finance. Crowdsupporting, Crowdinvesting, Crowdlending, Crowddonating, Munich, GRIN Verlag, https://www.grin.com/document/369323
