Crowd funding developing a strategy for crowd participation


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From the presentation given by me at the 12th International Conference of Economic Society of Thessaloniki.

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  • Good morning, I am happy to be here with you today. My name is Apostolos and I am a postgraduate student in the second semester in Finance and administration in the department of accounting in the Technological Educational institute of Serres.I am going to present you, my paper about crowdfunding and how to develop a strategy for crowd participation. I ‘ve conducted a secondary research in the extant literature of disciplines on relevant analogies of participation. I choose this methodology cause there is no a precisely defined sampling frame to securely contact a primary research.
  • So, What is crowd fundingAccording to Wikipedia, the first crowd created encyclopedia crowd funding describes…..I will highlight some terms in clarify them moreCrowdfunding is a collective effort of people who network, the true power of crowdfunding is based on the crowd, that makes crowdfunding highly related with networks and relationships theories.And where someone can find a network beyond any limits and borders? Definitely that place is the internet.Crowdfunding utilize internet thought crowd funding platforms.This definition does not mention that people who participate in a crowdfunding campaign get perks like tickets for concerts or t-shirts, end products or even shares and equities of the companies that support.
  • Crowdfunding is not a new concept indeed……Is just the Darwinism of donations, society has utilized networks through donation in order to fundraising money to build schools and social facilities. Even the statue of the liberty is a work of donation, French people donate in order to build the statue and American people donate to build the pedestal.The factors that lead to the genesis of crowd funding are both sociological and technological.The evolution in computing and web 2.0 makes the interaction of people from all over the world easier than ever before in human history.The advent of social media has changed the way people network and expand their networks beyond geographical limits.a boost to crowdfunding has been given by the improvement of paying methods, It is easier much easier and safer now to transfer money all over the world.Finally the crowd has started be regarded as a problem solver from problem creator.
  • During the last decade venture capital fail completely to make profits by investing in new entrepreneurial ventures, as the 75% of the total investment makes no profit at all for that reason, venture capitals are in pursuit of the next economic bubble to invest in.Also other formal sources of capital like banks and stock exchange markets have strict rules and high standards in order to finance a new business. There is a gap in investment for a new company and crowdfunding can fill it
  • In the mid-90’s internet communication between people started to go beyond email exchanges by the launch of AOL Messenger and the . That heralded the advent of a new era in the way people interact with each other and at the same time expressed the need for a fur-ther development of computing technologies and applications. At the late 90’s some internet campaigns that aimed to collect funds appeared . In 2005 Kiva , the first platform that allows entrepreneurs from developing countries to borrow money was launched. The establishment of Kiva was substantial to the evolution of crowdfunding and although a controversial project, Kiva is still a successful platform. It has already raised $295 million, with an out-standing of 98,94% repayment rate. Kiva’s successful model for lending money was developed and expanded into what is now known as peer-to-peer lending or person-to-person lending which occur between “peers” without the intermediation of traditional financial institutions. The first site that adopts the new “peer-to-peer lending “model was Zopa , followed by Prosper in 2006 and LendingClub in 2007. Those platforms were not par-ticularly successful in the beginning because of overly tight regulations and maybe because society was not quite ready for such changes at that point.In 2008-2009 innovations such as Facebook and Open ID changed com-pletely the way people interact and communicate. Every experience from then and on can be shared in Social Media platforms with people from all over the world, people can interact using those platforms without any geo-graphical limitation. This change has helped people to expand their social networks. In the period 2008-2009 IndieGoGo and Kickstarter was launched and both became very popular at that time, so popular that after 2 years Kickstarer set the world record for the largest amount of money that have ever been raised using crowd-funding for the TikTok + Luna Tik pro-ject. Between November and December of 2010, 13512 people “pledged” $942.578 for the TikTok +Luna Tik project. After the success of Kickstarter and IndieGoGo, a plethora of new reward –based crowdfunding platforms appear every day, many of them are niche-targeted or limited to a specific ge-ographical area or a specific community, or differentiated in some way. Therefore, crowd-funding as a method was established literally by the advent and mass acceptance of Kickstarter and IndieGoGo. Crowdfunding since then has continued evolving and in 2010 the first equity-based Crowdfund-ing was founded by GrowVC while in 2011 it was followed by Crowdcube and in 2012 by the Greek StartersFund .
  • As I said in the begging of the presentation, crowdfunding although a topic of interest from both the academic community and entrepreneurs, it has not been very well established yet. So in order to examine the different motives and incentives that lead people to participate in crowdfunding, I take into account studies from different disciplines with the same analogies in participation.
  • Crowd funding developing a strategy for crowd participation

    1. 1. School of Business and Administration Department of Accounting Technological Educational Institution of Serres 12th International Conference of Economic Society of Thessaloniki Crowd-funding: Developing a strategy for crowd participation. Gazepis Apostolos Prof.Dr.rer.pol. Mantzaris Ioannis Thessaloniki 2012
    2. 2. What is crowdfunding? Crowd funding or crowdfunding (alternately crowd financing, equity crowdfunding or hyper funding) describes the collective effort of individuals who network and pool their resources, usually via the Internet, to support efforts initiated by other people or organizations. Crowd funding is used in support of a wide variety of activities, including disaster relief, citizen journalism, support of artists by fans, political campaigns, startup company funding, movie or free software development, and scientific research. ~Wikipedia
    3. 3. Yet Crowdfunding is not a new concept is the Darwinism of donation and charities
    4. 4. Factors that lead to crowd-funding genesis: • Web 2.0 Has made the interaction of people from all over the world easier as never before in human history. • Social Media Social Media have changed the way people network and expand their social networks. • Payment methods It is easier and safer to transfer money all over the world than ever before. • Sociological factors Society and its members has been conceived as “Problem solver” by Sociologists.
    5. 5. The investment gap plays a catalytic role in the evolution of Crowd-funding. Formal sources of capital like banks and Venture Capitals are unwilling to invest in a new and small company. Crowd funding can be a source of capital in the first steps of a new venture. http://, (accessed on 10/5/2012)
    6. 6. Milestones in crowdfunding development 2008 Facebook and OpenID are founded, social Platforms are able to support 2000 A range of social applications JustGiving was founded 2010 And interactive functionalities 1990 - 2000 GrowVC was the first equity-based model 1999 - 2008 Internet campaigns funded projects and charity Followed in 2011 by Crowdcube Fundraising platforms Development of “peer-to-peer lending” model and Startersfund in 2012 1990 2005 Kiva was launced 2010 Luna Tik 2008 IndieGoGo and Kickstarter was founded. 2012
    7. 7. Motivators that lead to a crowdfunding participation. (In order to examine the different motives that lead to the participation in a crowdfunding campaign, they have been examined studies from different sciences with the same analogies in participation.) • • • • Monetary rewards. Social rewards. Psychological rewards. Hybridization of the former
    8. 8. The Marketing prism of crowdfunding. Crowd funding needs to incorporate a different marketing thought that will handle network, relationship aspects; a marketing thought able to function in a non linear environment. Also the needs of a new company demands a different marketing approach: Hills ( 1995, “Foreword” in David Carson, S. Cromie, P. McGowan & J. Hill, Marketing and Entrepreneurship in SMEs. An Innovative Approach (pp. xiii-xiv) Prentice Hall) states that even from 1990 it was assumed in academia that SMEs required a simplified version of the more sophisticated Marketing practice. Kotler (Kotler, P. (2003), Marketing Management, 11th. Edition, Prentice Hall pp 4-5) states that when an Enterprise is in its first steps of their development/operations a different marketing approach, called Entrepreneurial Marketing should be utilized.
    9. 9. The Entrepreneurial Marketing Mix proposed by Zontanos and Anderson. (Zontanos, G. and Anderson, A.(2009), “Relationships, marketing and small business: an exploration of links in theory and practice”, Qualitative Market Research: An International Journal, Vol.7 No.3, pp. 228- 236.) A simplified version of the more sophisticated Marketing Mix that consists of Purpose, Process, Practice, Person sets a concise foundation in the Marketing strategy of a new company. Those Variables are so fundamental to a new company that can help a crowdfunding campaign, if crowdfunding utilized as a capital source from that company.
    10. 10. General Conclusions / implementation • Consumers can also be investors • Consumers can also be marketers as they can generate content that can be spread from the crowdfunding platform and Social Media. • Crowdfunding express the Marketing Concept in the most genuinely way; consumers now can choose the product that adds value to them before it be produced. • A company that utilized crowdfunding successfully starts with a customer base ready.
    11. 11. Crowdfunding Participation Model Entrepreneurial Venture Person Purpose Practice Process Knowledge barrier Reinforcement Crowd Motivators Monetary Social Psychological Mixed Social – economic environment Participation Through A crowdfunding platform
    12. 12. Thank You! Questions?