Vincenzo Butticè
Politecnico di Milano / Management, Economics and Industrial Eng. Dept.
Vincenzo Butticè
Politecnico di M...
Vincenzo Butticè
Politecnico di Milano / Management, Economics and Industrial Eng. Dept.
CONTENTS
WHAT IS CROWDFUNDING?
Cr...
1. WHAT IS CROWDFUNDING?
TRADITIONAL METHODS TO FINANCE A START-UP
• FAMILY AND FRIENDS
• BANK LOAN
• BUSINESS ANGEL
CROWDFUNDING
• Crowdfunding involves an open call, essentially through
the Internet, for the provision of financial resour...
THE EVOLUTION OF THE PHENOMENON
1. WHAT IS CROWDFUNDING?
• CROWDFUNDING MODELS
CROWDFUNDING MODELS
DONATION-BASED: backers donate with no expectation of
any kind of rewards, driven by philanthropic mot...
DONATION-BASED CROWDUNDING
DONATION-BASED: backers donate with no
expectation of any kind of rewards, driven by philanthro...
REWARD-BASED CROWDUNDING
REWARD-BASED: the proponents offer non monetary
rewards in exchange for backers’ contribution.
ht...
LENDING-BASED CROWDUNDING
LENDING-BASED: The entrepreneur or company
borrows money and must repay it.
http://www.prosper.c...
EQUITY-BASED CROWDUNDING
EQUITY-BASED: Investors receive equity in the
company
https://www.seedrs.com/startups/glassup
INN...
1. WHAT IS CROWDFUNDING?
• ACTORS AND MOTIVATION
ACTORS INVOLVED
PROPONENT: submits to the crowd
his idea
BACKERS: finance worthy ideas
CROWDFUNDING PLATFORM: creates
the ...
WHY PROJECT PROPONENTS
CHOOSE CROWDFUNDING?
Crowdfunding can be an useful alternative
funding form
Crowdfunding promotes t...
CHALLANGES FOR THE PROPONENTS
CROWDFUNDING MAKES PUBLIC
YOUR IDEAS
TIME CONSUMING ACTIVITIES
PEOPLE SEE YOUR FAILURE
WHY BACKERS PARTICIPATE IN A
CROWDFUNDING CAMPAIGN?
INTRINSIC MOTIVATION: driven by an
interest or enjoyment in the task i...
TAXONOMY OF THE BACKERS
FOR PROFIT BACKERS: receive equity
for their money
EARLY ADOPTERS: customers who pre-
order a prod...
CROWDFUNDING PLATFORMS
MATCHING MARKET-PLACE
ALL OR NOTHING: pledged money is only
collected if the fundraising goal is me...
1. WHAT IS CROWDFUNDING?
• DETERMINANTS OF SUCCESS
DETERMINANTS OF SUCCESS
SOCIAL CAPITAL: number and strength of ties
PROJECT QUALITY
EARLY STAGE FUNDING
THE INVESTMENT PAT...
1. WHAT IS CROWDFUNDING?
• THE REGULATION
THE REGULATION TIME LINE
1. THE REWARD-BASED MODEL
• FEATURES
REWARDS BASED CROWDFUNDING
REWARD BASED CROWDFUNDING IS THE
MAINLY ADOPTED CROWDFUNDING MODEL
HIGHEST SUCCESS RATE
RELATIV...
MINIMUM REQUIREMENTS
PROJECT DESCRIPTION
REWARDS
PROPONENT’S INFORMATION
VIDEO
1. THE REWARD-BASED MODEL
• HOW TO PRESENT A CROWDFUNDING CAMPAIGN
HOW TO PRESENT A FUNDING CAMPAIGN
PRELIMINARY STEPS
DESIGN YOUR CAMPAIGN
FOLLOW YOUR CAMPAIGN
SUBMIT YOUR PROJECT
HOW TO PRESENT A FUNDING CAMPAIGN
PRELIMINARY STEPS:
HAVE A GOOD IDEA
EVALUATE ECONOMICALLY YOUR IDEA
PREPARE A BUDGET
ENG...
HOW TO PRESENT A FUNDING CAMPAIGN
DESIGN YOUR CAMPAIGN:
DESCRIBE YOUR IDEA
PREPARE A VIDEO
DEFINE REWARDS
PREPARE A COMPLE...
HOW TO PRESENT A FUNDING CAMPAIGN
PROPOSE YOUR FUNDING CAMPAIGN
FOLLOW YOUR CAMPAIGN:
ANSWER QUESTIONS AND PROVIDE
ADJOURN...
1. THE REWARD-BASED MODEL
• AN EXAMPLE: KICKSTARTER
AN EXAMPLE OF A REWARD-BASED
PLATFORM: KICKSTARTER
GENERALIST CROWDFUNDING PLATFORM
HELP BRING CREATIVE PROJECTS TO LIFE
Rank Total USD
Project
name
Creator Category % funded Backers
1 10,266,845
Pebble: E-
Paper
Watch for
iPhone and
Android
P...
https://www.youtube.com/watch?feature=player_embedded&v=008ZofyIRHo
https://www.youtube.com/watch?v=nSScO6Vh7ug#t=129
KICKSTARTER
https://www.kickstarter.com/
1. A CASE STUDY
A SUCCESSFUL PROJECT
HTTPS://WWW.KICKSTARTER.COM/PROJECTS/WAKAWAKALIGHT/WAKAWAKA-POWER-THE-BEST-
COMPACT-SOLAR-POWER-STATI...
AN UNSUCCESSFUL PROJECT
https://www.kickstarter.com/projects/600730948/the-mwezi-light-made-in-africa-for-africa?ref=live
DIFFERENCES BETWEEN THE
CASES
PROJECT DESCRIPTION
INTERNAL AND EXTERNAL SOCIAL
CAPITAL
INFORMATION PROVIDED
COMMENTS AND A...
A SHORT SUMMARY
5.9 crowd funding, a new source of finance for innovation and sustainability
5.9 crowd funding, a new source of finance for innovation and sustainability
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5.9 crowd funding, a new source of finance for innovation and sustainability

  1. 1. Vincenzo Butticè Politecnico di Milano / Management, Economics and Industrial Eng. Dept. Vincenzo Butticè Politecnico di Milano . Department of Management Economics and Industrial Engineering. Learning Network on Sustainability (EU asia-link) Learning Network on Sustainabile energy systems (EU edulink) course System Design for Sustainability (SDS) Crowdfunding, a new source of finance for innovation and sustainability
  2. 2. Vincenzo Butticè Politecnico di Milano / Management, Economics and Industrial Eng. Dept. CONTENTS WHAT IS CROWDFUNDING? Crowdfunding Models People Involved And Motivation Determinants of Success Regulation REWARDS BASED CROWDFUNDING Features How To Present a Campaign An Example: Kickstarter CASE STUDY A Successful Story An Unsuccessful Story . …
  3. 3. 1. WHAT IS CROWDFUNDING?
  4. 4. TRADITIONAL METHODS TO FINANCE A START-UP • FAMILY AND FRIENDS • BANK LOAN • BUSINESS ANGEL
  5. 5. CROWDFUNDING • Crowdfunding involves an open call, essentially through the Internet, for the provision of financial resources either in form of donation or in exchange for some form of reward and/or voting rights in order to support initiatives for specific purposes (Lambert and Schwienbacher , 2010)
  6. 6. THE EVOLUTION OF THE PHENOMENON
  7. 7. 1. WHAT IS CROWDFUNDING? • CROWDFUNDING MODELS
  8. 8. CROWDFUNDING MODELS DONATION-BASED: backers donate with no expectation of any kind of rewards, driven by philanthropic motivation. EQUITY-BASED: Investors receive equity in the company. LENDING-BASED: The entrepreneur or company borrows money and must repay it. REWARD-BASED: the proponents offer non monetary rewards in exchange for backers’ contribution.
  9. 9. DONATION-BASED CROWDUNDING DONATION-BASED: backers donate with no expectation of any kind of rewards, driven by philanthropic motivation. http://buonacausa.org/ http://buonacausa.org/cause/standup SOCIAL CHARITY THIS FUNDING METHOD IS THE EVOLUTION OF ONLINE FUNDRAISING < 10.000 $
  10. 10. REWARD-BASED CROWDUNDING REWARD-BASED: the proponents offer non monetary rewards in exchange for backers’ contribution. https://www.kickstarter.com/?ref=nav https://www.kickstarter.com/projects/600730948/th e-mwezi-light-made-in-africa-for-africa?ref=live CREATIVE NON-MONETARY REWARDS < 100.000 $
  11. 11. LENDING-BASED CROWDUNDING LENDING-BASED: The entrepreneur or company borrows money and must repay it. http://www.prosper.com/ https://www.thincats.com/Apps/WebObjects/thincats- pfp.woa/1/ra/Website/14624/14625/index.html SMALL BUSINESSES INTEREST AND REPAYMENT OF THE LOAN THIS FUNDING METHOD IS SLIGHTLY DIFFERENT FROM PEER TO PEER LENDING AND MICROFINANCE.
  12. 12. EQUITY-BASED CROWDUNDING EQUITY-BASED: Investors receive equity in the company https://www.seedrs.com/startups/glassup INNOVATIVE START UPS DIVIDEND THIS IS THE MOST CONTROVERSIAL CROWDFUNDING MODEL < 250.000 $
  13. 13. 1. WHAT IS CROWDFUNDING? • ACTORS AND MOTIVATION
  14. 14. ACTORS INVOLVED PROPONENT: submits to the crowd his idea BACKERS: finance worthy ideas CROWDFUNDING PLATFORM: creates the condition for collaboration
  15. 15. WHY PROJECT PROPONENTS CHOOSE CROWDFUNDING? Crowdfunding can be an useful alternative funding form Crowdfunding promotes the development of an ecosystem around the project. Crowdfunding increases the awareness of clients’ preferences Crowdfunding can be an engine for radical technological innovation
  16. 16. CHALLANGES FOR THE PROPONENTS CROWDFUNDING MAKES PUBLIC YOUR IDEAS TIME CONSUMING ACTIVITIES PEOPLE SEE YOUR FAILURE
  17. 17. WHY BACKERS PARTICIPATE IN A CROWDFUNDING CAMPAIGN? INTRINSIC MOTIVATION: driven by an interest or enjoyment in the task itself. EXTRINSIC MOTIVATION: refers to the performance of an activity in order to attain an outcome.
  18. 18. TAXONOMY OF THE BACKERS FOR PROFIT BACKERS: receive equity for their money EARLY ADOPTERS: customers who pre- order a product SOCIAL BACKERS: people interested in being part of a community CULTURAL BACKERS: philanthropists who don’t expect any kind of rewards
  19. 19. CROWDFUNDING PLATFORMS MATCHING MARKET-PLACE ALL OR NOTHING: pledged money is only collected if the fundraising goal is met. If the goal is not met, no money is collected. KEEP IT ALL: even if the target capital is not reached, the entrepreneurs receive the money.
  20. 20. 1. WHAT IS CROWDFUNDING? • DETERMINANTS OF SUCCESS
  21. 21. DETERMINANTS OF SUCCESS SOCIAL CAPITAL: number and strength of ties PROJECT QUALITY EARLY STAGE FUNDING THE INVESTMENT PATTERNS ARE INDEPENDENT FROM GEOGRAPHICAL DISTANCE
  22. 22. 1. WHAT IS CROWDFUNDING? • THE REGULATION
  23. 23. THE REGULATION TIME LINE
  24. 24. 1. THE REWARD-BASED MODEL • FEATURES
  25. 25. REWARDS BASED CROWDFUNDING REWARD BASED CROWDFUNDING IS THE MAINLY ADOPTED CROWDFUNDING MODEL HIGHEST SUCCESS RATE RELATIVELY LOW RISKS LOW COMPLEXITY AND UNCERTAINTY
  26. 26. MINIMUM REQUIREMENTS PROJECT DESCRIPTION REWARDS PROPONENT’S INFORMATION VIDEO
  27. 27. 1. THE REWARD-BASED MODEL • HOW TO PRESENT A CROWDFUNDING CAMPAIGN
  28. 28. HOW TO PRESENT A FUNDING CAMPAIGN PRELIMINARY STEPS DESIGN YOUR CAMPAIGN FOLLOW YOUR CAMPAIGN SUBMIT YOUR PROJECT
  29. 29. HOW TO PRESENT A FUNDING CAMPAIGN PRELIMINARY STEPS: HAVE A GOOD IDEA EVALUATE ECONOMICALLY YOUR IDEA PREPARE A BUDGET ENGAGE PEOPLE AROUND THE PROJECT IMPROVE YOUR REPUTATION
  30. 30. HOW TO PRESENT A FUNDING CAMPAIGN DESIGN YOUR CAMPAIGN: DESCRIBE YOUR IDEA PREPARE A VIDEO DEFINE REWARDS PREPARE A COMPLETE CV
  31. 31. HOW TO PRESENT A FUNDING CAMPAIGN PROPOSE YOUR FUNDING CAMPAIGN FOLLOW YOUR CAMPAIGN: ANSWER QUESTIONS AND PROVIDE ADJOURNMENTS PROMOTE YOUR PROJECT INVOLVE YOUR SOCIAL NETWORK
  32. 32. 1. THE REWARD-BASED MODEL • AN EXAMPLE: KICKSTARTER
  33. 33. AN EXAMPLE OF A REWARD-BASED PLATFORM: KICKSTARTER GENERALIST CROWDFUNDING PLATFORM HELP BRING CREATIVE PROJECTS TO LIFE
  34. 34. Rank Total USD Project name Creator Category % funded Backers 1 10,266,845 Pebble: E- Paper Watch for iPhone and Android Pebble Technology Design 10,266 68,928 2 8,596,474 Ouya: A New Kind of Video Game Console Ouya Inc. Video Games 905 63,416 3 5,702,153 Veronica Mars movie Rob Thomas Film & Video 285 91,585 KICKSTARTER RECORDS
  35. 35. https://www.youtube.com/watch?feature=player_embedded&v=008ZofyIRHo
  36. 36. https://www.youtube.com/watch?v=nSScO6Vh7ug#t=129
  37. 37. KICKSTARTER https://www.kickstarter.com/
  38. 38. 1. A CASE STUDY
  39. 39. A SUCCESSFUL PROJECT HTTPS://WWW.KICKSTARTER.COM/PROJECTS/WAKAWAKALIGHT/WAKAWAKA-POWER-THE-BEST- COMPACT-SOLAR-POWER-STATIO?REF=LIVE
  40. 40. AN UNSUCCESSFUL PROJECT https://www.kickstarter.com/projects/600730948/the-mwezi-light-made-in-africa-for-africa?ref=live
  41. 41. DIFFERENCES BETWEEN THE CASES PROJECT DESCRIPTION INTERNAL AND EXTERNAL SOCIAL CAPITAL INFORMATION PROVIDED COMMENTS AND ADJOURNMENTS REWARDS
  42. 42. A SHORT SUMMARY
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