New Academic Research on Crowdfunding

CrowdFund Beat News Wire, PRESS RELEASE
California Management Review Publishes Special Issue on Crowdfunding

Popular opinion suggests that major crowdfunding platforms serve to democratize the process of innovation, enabling entrepreneurs and creators in a way that could not be supported under traditional models. But emerging research paints a more nuanced picture.

The popularity of crowdfunding among entrepreneurs and investors has opened up new opportunities that would not have been possible in the pre-internet era. For example, pre-sales on Kickstarter allow would-be creators to get a sense of demand for their product before investing heavily in development and manufacturing. Other crowd-based platforms like LendingClub actively seek to subvert existing financial institutions by facilitating peer-to-peer lending.

“Crowdfunding offers something other funding mechanisms do not—a way to democratize access to the capital needed to commercialize and distribute innovation.”

As a rapidly emerging and evolving phenomenon, crowdfunding is still being studied extensively. A new collection of articles published in the latest issue of California Management Review highlights the strengths and weaknesses of crowdfunding as it exists today.

 

 

 

In 2014, musician and entrepreneur Jack Conte published a blog post describing the financials of his band Pomplamoose’s 28-day U.S. tour. Conte explained that despite selling out shows at many historic venues, the band actually lost over $11,000 on tour, providing evidence of the decline in the music industry. To combat this trend, Conte founded a new crowdfunding platform, Patreon, that allows supporters to send a defined amount of money to artists each time they release new material. He hoped that this would allow fellow creators to make a living in the new digital economy.

Conte is on the right track. Earlier this month, Patreon raised an additional $30 million in Series B funding. The platform joins a stable of successful crowdfunding websites like Kickstarter and Indiegogo, which have famously funded a wide variety of projects ranging from the production of albums and short films to 3D printers and smartwatches. While Conte’s success cannot be disputed, a major question remains: can crowdfunding become a solution for everybody, or just a handful of outliers?

SPECIAL ISSUE Crowdfunding

In the past, launching a company and shipping a product was something that could only be done by those who had money, or those who could attract investment from venture capitalists. But things are changing. The advent of crowdfunding platforms — internet-based marketplaces that connect those seeking funds with hundreds if not thousands of supporters — has been greeted with enthusiasm by entrepreneurs, policymakers, and the general public alike. Their enthusiasm is understandable: today, normal people can invest in ideas that they think might gain broad appeal. But crowdfunding remains an emerging and evolving phenomenon that is not well understood. Far from a fad, this mega trend is here to stay — and has broad implications across many industries.

 

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