Free Crowdfunding Promotion
Publication info: M2 Presswire ; Coventry [Coventry]22 Aug 2016.
ProQuest document link
ABSTRACT
CrowdFunding is a team work! Twitter, Facebook, Press Releases, Blogs and web Communities Leverage with
power of Google and promote with its proven results! focused on kickstarter crowdfunding, crowdfunding sites,
business crowdfunding ,indiegogo crowdfunding, indiegogo, crowdfunding websites, uk crowdfunding, business ,
games crowdfunding, film crowdfunding, Crowd funding , crowdfunding sites, CrowdFunding, Crowd funding,
Startups Featured crowdfunding 2016 crowdsourcing.org crowdsourcing Kickstarter Indiegogo Campaign funding
Video 2016 game Project Movie Crowdfunding Trailer crowdfunding.
FULL TEXT
M2 PRESSWIRE-August 22, 2016-Free Crowdfunding Promotion
(C)2016 M2 COMMUNICATIONS http://www.m2.com
August 22, 2016
Are You Drawing A Crowd* Ask Yourself How Can I Add More Backers and Investors?
FREE Promotion ~ Promote your Campaign Business Idea Invention Product Cause at
http://crowdfundingexposure.com/free-crowdfunding-promotion-promote-my-crowdfunding-campaign-for-free/
today!
CrowdFunding Exposure wants to be part of your success. As our name implies.. we KNOW CrowdFunding and
know that a campaign is a team work and reaching crowd masses is the goal and we are the experts in
CrowdFunding Exposure since 2004.
Our experience shows between 1% to 3% of the crowd will invest in your project, thus the more time and more
people you can reach will increase your chance of your success. The following social media channels have high
potential of producing more interested backers, investors, and funders.
FREE Promotion ~ Promote your Campaign Business Idea Invention Product Cause
We started in 2004 as an Pioneer in Internet Marketing and Promotion. Twelve years ago we built a Social Media
and Press release system second to none. Our Accounts accounts and communities to find, collaborate and build
the largest CrowdFunding Community in the world totaling over 2.5 Million Investors and Angel Investors. Why*
Because we believe CrowdFunding is Creator's Economy which can solve many of the current issues in both the
business and social world...
Discover the advantage &power of working with the World's largest CrowdFunding Consulting, Multi-Media &it's
Web Communities leveraging Google &promoting with proven results.
CrowdFunding is a team work! Twitter, Facebook, Press Releases, Blogs and web Communities Leverage with
power of Google and promote with its proven results! focused on kickstarter crowdfunding, crowdfunding sites,
business crowdfunding ,indiegogo crowdfunding, indiegogo, crowdfunding websites, uk crowdfunding, business ,
games crowdfunding, film crowdfunding, Crowd funding , crowdfunding sites, CrowdFunding, Crowd funding,
Startups Featured crowdfunding 2016 crowdsourcing.org crowdsourcing Kickstarter Indiegogo Campaign funding
Video 2016 game ...
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Free Crowdfunding Promotion Publication info M2 Presswir.docx
1. Free Crowdfunding Promotion
Publication info: M2 Presswire ; Coventry [Coventry]22 Aug
2016.
ProQuest document link
ABSTRACT
CrowdFunding is a team work! Twitter, Facebook, Press
Releases, Blogs and web Communities Leverage with
power of Google and promote with its proven results! focused
on kickstarter crowdfunding, crowdfunding sites,
business crowdfunding ,indiegogo crowdfunding, indiegogo,
crowdfunding websites, uk crowdfunding, business ,
games crowdfunding, film crowdfunding, Crowd funding ,
crowdfunding sites, CrowdFunding, Crowd funding,
Startups Featured crowdfunding 2016 crowdsourcing.org
crowdsourcing Kickstarter Indiegogo Campaign funding
Video 2016 game Project Movie Crowdfunding Trailer
crowdfunding.
FULL TEXT
2. M2 PRESSWIRE-August 22, 2016-Free Crowdfunding
Promotion
(C)2016 M2 COMMUNICATIONS http://www.m2.com
August 22, 2016
Are You Drawing A Crowd* Ask Yourself How Can I Add More
Backers and Investors?
FREE Promotion ~ Promote your Campaign Business Idea
Invention Product Cause at
http://crowdfundingexposure.com/free-crowdfunding-
promotion-promote-my-crowdfunding-campaign-for-free/
today!
CrowdFunding Exposure wants to be part of your success. As
our name implies.. we KNOW CrowdFunding and
know that a campaign is a team work and reaching crowd
masses is the goal and we are the experts in
CrowdFunding Exposure since 2004.
Our experience shows between 1% to 3% of the crowd will
invest in your project, thus the more time and more
people you can reach will increase your chance of your success.
The following social media channels have high
potential of producing more interested backers, investors, and
funders.
3. FREE Promotion ~ Promote your Campaign Business Idea
Invention Product Cause
We started in 2004 as an Pioneer in Internet Marketing and
Promotion. Twelve years ago we built a Social Media
and Press release system second to none. Our Accounts accounts
and communities to find, collaborate and build
the largest CrowdFunding Community in the world totaling over
2.5 Million Investors and Angel Investors. Why*
Because we believe CrowdFunding is Creator's Economy which
can solve many of the current issues in both the
business and social world...
Discover the advantage &power of working with the World's
largest CrowdFunding Consulting, Multi-Media &it's
Web Communities leveraging Google &promoting with proven
results.
CrowdFunding is a team work! Twitter, Facebook, Press
Releases, Blogs and web Communities Leverage with
power of Google and promote with its proven results! focused
on kickstarter crowdfunding, crowdfunding sites,
business crowdfunding ,indiegogo crowdfunding, indiegogo,
crowdfunding websites, uk crowdfunding, business ,
games crowdfunding, film crowdfunding, Crowd funding ,
crowdfunding sites, CrowdFunding, Crowd funding,
4. Startups Featured crowdfunding 2016 crowdsourcing.org
crowdsourcing Kickstarter Indiegogo Campaign funding
Video 2016 game Project Movie Crowdfunding Trailer
crowdfunding.
FREE CrowdFunding Promotion for a limited time available at
http://crowdfundingexposure.com/free-
https://prx-
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crowdfunding-promotion-promote-my-crowdfunding-campaign-
for-free/
FREE source on Facebook at at
https://www.facebook.com/groups/CrowdFundingExposure/
((Comments on this story may be sent to [email protected]))
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71. ABSTRACT
CrowdFunding is a team work! Twitter, Facebook, Press
Releases, Blogs and web Communities Leverage with
power of Google and promote with its proven results! focused
on kickstarter crowdfunding, crowdfunding sites,
business crowdfunding ,indiegogo crowdfunding, indiegogo,
crowdfunding websites, uk crowdfunding, business ,
games crowdfunding, film crowdfunding, Crowd funding ,
crowdfunding sites, CrowdFunding, Crowd funding,
Startups Featured crowdfunding 2016 crowdsourcing.org
crowdsourcing Kickstarter Indiegogo Campaign funding
Video 2016 game Project Movie Crowdfunding Trailer
crowdfunding.
FULL TEXT
M2 PRESSWIRE-August 22, 2016-Free Crowdfunding
Promotion
(C)2016 M2 COMMUNICATIONS http://www.m2.com
August 22, 2016
Are You Drawing A Crowd* Ask Yourself How Can I Add More
Backers and Investors?
FREE Promotion ~ Promote your Campaign Business Idea
72. Invention Product Cause at
http://crowdfundingexposure.com/free-crowdfunding-
promotion-promote-my-crowdfunding-campaign-for-free/
today!
CrowdFunding Exposure wants to be part of your success. As
our name implies.. we KNOW CrowdFunding and
know that a campaign is a team work and reaching crowd
masses is the goal and we are the experts in
CrowdFunding Exposure since 2004.
Our experience shows between 1% to 3% of the crowd will
invest in your project, thus the more time and more
people you can reach will increase your chance of your success.
The following social media channels have high
potential of producing more interested backers, investors, and
funders.
FREE Promotion ~ Promote your Campaign Business Idea
Invention Product Cause
We started in 2004 as an Pioneer in Internet Marketing and
Promotion. Twelve years ago we built a Social Media
and Press release system second to none. Our Accounts accounts
and communities to find, collaborate and build
the largest CrowdFunding Community in the world totaling over
2.5 Million Investors and Angel Investors. Why*
73. Because we believe CrowdFunding is Creator's Economy which
can solve many of the current issues in both the
business and social world...
Discover the advantage &power of working with the World's
largest CrowdFunding Consulting, Multi-Media &it's
Web Communities leveraging Google &promoting with proven
results.
CrowdFunding is a team work! Twitter, Facebook, Press
Releases, Blogs and web Communities Leverage with
power of Google and promote with its proven results! focused
on kickstarter crowdfunding, crowdfunding sites,
business crowdfunding ,indiegogo crowdfunding, indiegogo,
crowdfunding websites, uk crowdfunding, business ,
games crowdfunding, film crowdfunding, Crowd funding ,
crowdfunding sites, CrowdFunding, Crowd funding,
Startups Featured crowdfunding 2016 crowdsourcing.org
crowdsourcing Kickstarter Indiegogo Campaign funding
Video 2016 game Project Movie Crowdfunding Trailer
crowdfunding.
FREE CrowdFunding Promotion for a limited time available at
http://crowdfundingexposure.com/free-
https://prx-
herzing.lirn.net/login?url=https://search.proquest.com/docview/
1812836413?accountid=167104
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Crowdfunding Promotion
Running Head: CROWDFUNDING 1
CROWDFUNDING 8
76. Crowdfunding
Crowdfunding can be regarded as a new method used in raising
funds. The method is growing promptly around the universe.
Globally, the method, crowdfunding platforms, was used to
raise more than US$16B in 2014 while in 2015 more than
US$32 B was raised. Crowdfunding is the way or process in
which a lot of individuals regarded as the crowd contribute
comparatively small amounts in terms of money with intentions
to support businesses or projects. The crowdfunding is grouped
into three ways which include rewards, debt, and equity
crowdfunding generally. However, how much the method is
useful to businesses and projects, it has not gained popularity
amongst individuals worldwide. The biggest challenge to this
that even people who are aware of it are not willing to learn
how the term works. Most entrepreneurs do not appreciate it. In
77. order for the crowding funding to grow, education is very vital.
Particularly markets in the Middle East because the concept is
novel compared to European and US markets.
Keywords: Crowdfunding, Rewards, Debt, Equity, Education
Crowdfunding is a term for describing the use of small amounts
of money obtain from a great number of individuals and
organizations to fund a project. Crowdfunding permits authors
of for-profit generation, masterful, and social dares to finance
their endeavors by drawing on moderately little commitments
from a generally expansive number of people utilizing the web,
without standard money related go-betweens. Crowdfunding has
four subcategories such as donation crowdfunding, reward
crowdfunding, peer-to-peer lending and equity crowdfunding.
Crowdfunding tasks can go incredibly in both objective and
size, from little aesthetic activities to business people looking
for a huge number of dollars in seed capital as a contrasting
option to conventional funding venture. Though equity
crowdfunding gives ventures the chance to collect capital from
a huge base of financiers, many campaigns sometimes tend to be
unsuccessful (Kuppuswamy and Bayus, 2016).
Lukkarinen et al. (2016), carried out a research to find out the
factors which contribute to the success of Crowdfunding
project. The authors drew their research using equity and
reward-based crowdfunding which is most used by
entrepreneurs. Utilizing data from North Europe, from one of
the leading platforms which facilitates crowdfunding, they
explored factors which drove investors as well as the amount
gotten from the equity crowdfunding promotions. The authors
found out that besides some crowdfunding projects being
successful, there are also other projects which are not
successful and make a huge amount of losses. The results
indicated that success of crowdfunding campaigns related to
pre-identified crowdfunding campaign features as well as both
public and private networks’ utilization.
In a study conducted by Kuppuswamy and Bayus (2016), to
determine if someone’ contribution to someone else
78. crowdfunding project matter? They considered the
crowdfunding dynamics for project support for a given time.
They proposed that individuals support crowdfunding project
financially if they are assured that their support and
involvement will result in an impact. Since perceptions of
influence are positively connected to the objective proximity,
they predicted that project support using crowdfunding
increases when the project funding heads to its target aim.
Furthermore, since motivation reduces after the objective is
reached, they further predicted that crowdfunding helps
significantly decrease when target objective is attained. They
found the above with strong reference for hypotheses gotten
from the study of Kickstarter.
Davis et al. (2017), carried research to determine whether there
is a customers’ perception of a product and its crowdfunding.
They drew their study on the effective events theory. The
research concerned funders' perceptions, as well as the
expectation alignment in products with their presenters. They
tested their hypotheses relationships which were drawn from a
sample which included 102 participants. The participants
assessed ten different kinds of product pitches made which were
made by ten different entrepreneurs. The results indicated that
crowdfunding is positively related to product creativity, either
direct or indirect. The indirect effect in contingent to the extent
of funders’ perception on the entrepreneurs whether he/she is
passionate or not, i.e., the perceived entrepreneurial, passionate
upsurges positive nature for the indirect effect.
Zao et al. (2016) researched to find out the Determinants of
backers’ funding intention in crowdfunding because the success
of crowdfunding projects had become less than 50%. They
considered that project components found in most platforms
should attract visitors’ as well increasing achievement of goals
for fundraising. Utilizing the social exchange theory for the
intentions of funding which influenced backers, the study
examined key factors. 204 backers were involved in the
research. The204 backers were involved in the study. The
79. results indicated to be a relationship between the fundraising
intentions and the commitment.
However, how much the method is useful to businesses and
projects, it has not gained popularity amongst individuals
worldwide. The biggest challenge to this is that even people
who are aware of it are not willing to learn how the term works.
Most entrepreneurs do not appreciate it. In order for the
crowding funding to grow, education is very vital. Particularly
markets in the Middle East because the concept is novel
compared to European and US markets.
Studies have been done worldwide to relate the success of
crowdfunding projects and peoples’ awareness. The finding has
been mixed up, indicating several factors which result in its
success. However, these factors do not indicate if the success is
directly attributable to the education of crowdfunding to people.
The people fail to know crowdfunding well has resulted in many
projects failing. It is in this line of the above arguments that
this study, therefore, intends to establish and understand if
education can make people get familiar with crowdfunding
which can result in its growth. So the research question would
be; is there a relationship between the success of crowdfunding
and people’ familiarity with education?
Crowdfunding refers to as a process by which a project or a
venture is funded by raising many little amounts of capital by a
large group of people through the internet. Its platforms are
websites which allow to set up an online fundraising campaign
and receive money from individuals. It is a combination of
crowdsourcing, a practice of engaging a group of people for a
common goal especially innovation, and micro-financing. The
entire act is made possible by three groups of people namely the
project initiator, a person who gives out an idea about the
project and how the money will be contributed, individuals or
groups who second the initiator's idea and lastly a moderating
organization that gathers the two parties to launch the concept.
Undoubtedly, the crowding process has grown significantly in
recent years helping individuals who have business ideas but
80. lack capital to be funded. However, global business analysts
still consider the process to be in its early stage of development
because many people globally have not embraced the method of
project funding.
1. Donation Crowdfunding
This type of crowdfunding is a way to fund money for a project
by asking individuals or large numbers of generous donors
online. Donations based crowdfunding usually run on a charity
basis and not for profit. Donators see their rewards in the form
of happiness because their money is being used for a great
cause.
2. Reward-based crowdfunding
This is a type of crowdfunding where the individuals taking part
in an initiated project contribute a certain agreed amount of
money for a reward. Most of the time, the token is usually the
commodity being produced. There are two leading platforms of
overcrowding that are reward-based namely the Kickstarter and
Indiegogo. It is believed that the reward based technique is
more rewarding than the other categories for it focuses more on
the act of only donating to come up with the money required to
run the project. This implies that one does not have to seek
funds from other sources for there is no fixed amount of money
a backer is required to contribute sparing him from the risks
that might be associated with taking bank loans.
3. Peer to peer lending
This is a category of crowdfunding entails the process whereby
a peer to peer lending sites links borrowers with possible
investors via the internet. The peer to peer lending sites ensures
they have all the relevant details about a borrower to avoid
circumstance of cons taking advantage. The lending services
also act as an intermediary of the interest rates to be paid by a
borrower. This method of raising capital to run an errand has
benefits; for instance, an investor can get substantial returns of
interest as compared to if he took his money in the bank.
4. Equity Crowdfunding
This type of crowdfunding is similar to peer-to-peer lending
81. regarding an online platform. Individuals can invest in a
business through the platform and gain equity stake. These
businesses are early stage small start-ups with no other access
to funding. Once the online platform completes the equity
raising, then the crowd investors hold equity stakes in the firm.
However, these businesses are riskier as an investment.
Success is a process of achieving set goals.
Many people are not familiar with crowdfunding, such that they
need education about it.
However, how much the crowdfunding is useful to businesses
and projects, it has not gained popularity amongst individuals
worldwide. The biggest challenge to this is that even people
who are aware of it are not willing to learn how the term works.
Most entrepreneurs do not appreciate it. In order for the
crowding funding to grow, education is very vital. Particularly
markets in the Middle East because the concept is novel
compared to European and US markets. This study is
significant to the following groups of people: scholars, the
government of different nations, policymakers, investors and
the corporate bodies. There is a need for the general public to
know and understand well what crowdfunding is before
investing their funds to those projects being backed by the
crowdfunding. Through the study, they will be able to
understand it well. Investors will also understand the reason
why some of their projects fail upon being initiated. For
scholarly purposes, this study contributes to this discussion
through finding the relationship between education of people
and success of crowdfunding. Future researchers can use the
findings of this study to further arguments on the knowledge of
people vs. the crowdfunding growth or on other topics that find
this study relevant.
Crowdfunding success on projects depends on various factors
including people aware of what the crowdfunding what it is.
Education plays a vital role in informing the public what it is
and what intentions are projects are up to. Education for the
above can be carried out through the Social Media as well as in
82. school classes. Molick (2013), suggests that through personal
networks as well as the underlying project quality results in the
success of projects using crowdfunding efforts.
Notwithstanding, over a huge amount of money regarding
billion dollars used by a vast number of individual
crowdfunding sponsor an extensive scale activity by US
Congress to empower crowdfunding as a wellspring of capital
for new pursuits. Even essential education or scholastic
information of the elements of crowdfunding is missing, outside
of the still-unprecedented examination of specific crowdfunding
endeavors Butticè, Colombo, & Wright, 2017). For instance,
researchers know next to none about the flow of effective
crowdfunding, and also the general appropriation and utilization
of crowdfunding components. No information to show in the
case of crowdfunding endeavors fortify or negate existing
hypotheses about how ventures raise capital and make progress.
There is additionally vulnerability about the long haul
ramifications of crowdfunding, for example, in the case of
existing activities eventually convey the items they guarantee.
To put it plainly, this vital and developing region of
entrepreneurial movement and government activity is
understudied, even as both practice and strategy keep on rapidly
progress. People should be educated all that is concerning the
above.
There are various forms and benefits of crowdfunding which
people should be educated to know more about them so that
they can take advantage of them. They can be educated on the
wide variety of benefits such as in a donation-based
crowdfunding technique which can help one to get a Nobel price
is where one comes up with the idea of raising money for a
charitable cause. Examples are educating the girl child on ways
to avoid getting pregnant before finishing school, conserving
the energy, helping the orphans or the elderly in the society
among others. The person can be shortlisted for the Nobel
award because of his actions that purposes to make the world a
better place. Donation based has an advantage of enabling one
83. to raise money for his project that is non-profitable through
internet sites, for example, Milaap. This makes it more cost-
effective as compared to the traditional way of raising money
for a charitable cause that required one to use television or
radio stations to advertise (Davis et al., 2017). Moreover, the
new method of raising fund for charity projects saves one the
process of booking space for his advertisement on air.
Pirkle (2015), indicates that many people are not aware of the
crowdfunding as a way of funding their projects. They have
been constraining to growth by banks because they have only
known them as sources of funds. However, these entrepreneurs
are open to other options to fund their business such as
crowdfunding. The author further indicates that there is little
knowledge held by the public concerning the crowdfunding, and
even those who know about it are not well informed of how it
works. Pirkle further suggests that governments and other
bodies should come up with ways of educating the people on the
usefulness of crowdfunding. He indicates that crowdfunding can
be used for various purposes to support charities. He further
states that the traditional forms of banking are not viable since
they cannot help acquire enough capitals.
For Eureeca, with the education of financial specialists
(investors) and entrepreneurs about the crowdfunding – how it
operates, why it's useful, how your venture can be arranged for
a startup –essential challenge. Business people, for instance, are
furnished with formats, go-to-showcase methodologies, and
promoting playbooks. They likewise reach several classes and
workshops for getting ready organizations for the stage.
Financial specialists are additionally focused on such measures
so as to influence the crowd investing in processing not so much
befuddling but rather more engaging (Pirkle, 2015).
In conclusion, I would indicate that Crowdfunding can make it
possible for large crowds of people to fund their innovative
projects. The kind of funding can tap much wisdom of crowds
who were previously not connected it. Countries, States,
Nations and other groups should come with ways to educate the
84. people on how to appreciate the crowdfunding which can
improve finances of their projects. I would recommend the
Success of projects initiated through crowdfunding can only be
successful if all parties involved are well informed through
education.
References
Butticè, V., Colombo, M. G., & Wright, M. (2017). Serial
crowdfunding, social capital, and
project success. Entrepreneurship Theory and Practice, 41(2),
183-207.
Davis, B., Hmieleski, K., Webb, J., & Coombs, J. (2017).
Funders’ positive affective reactions to
entrepreneurs’ crowdfunding pitches. The influence of
perceived product creativity and
entrepreneurial passion. Journal of Business Venturing, 32 (1),
90-106.
Kuppuswamy, V., & Bayus, B. (2017). Does my contribution to
your crowdfunding project
matter?. Journal of Business Venturing, 32 (1), 72-89. Retrieved
from
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302075
Lu, L., & Fulk, J. (2017, January). Exploring Crowdfunding
Projects’ Success through Social
Embeddedness and Knowledge Exchange Process. In Academy
of Management Proceedings (Vol. 2017, No. 1, p. 15917).
Academy of Management.
Lukkarinen, A., Teich, J., Wallenius, H., & Wallenius, J.
(2016). Success drivers of online equity
crowdfunding campaigns. Decision Support Systems, 87, 26-38.
Retrieved from
https://www.sciencedirect.com/science/article/pii/S0167923616
300598
85. Mollick, E. (2014). The dynamics of crowdfunding: An
exploratory study. Journal of Business
Venturing, Retrieved from
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Pirkle, H. (2015). Crowdfunding platforms see education as the
key to growth. Retrieved from
https://www.wamda.com/2015/02/education-key-to-
crowdfunding-success
Zhao, Q., Chen, C., Wang, J. & Chen, P. (2016). Determinants
of backers’ funding intention in
crowdfunding: Social exchange theory and regulatory focus.
Retrieved
fromhttps://www.sciencedirect.com/science/article/pii/S073658
5316300582
1 | P a g e
1 The authors are a Research Intern and Senior Economist at
IOSCO. They thank those who participated in industry
roundtables and
conference calls for their open and frank views on this subject.
Additionally they would like to thank IOSCO members for their
contribution in helping to craft certain sections of this report.
Crowd-funding: An Infant
86. Industry Growing Fast
Staff Working Paper of the IOSCO Research Department
Authors: Eleanor Kirby and Shane Worner 1
This Staff Working Paper should not be reported as representing
the views of IOSCO.
The views and opinions expressed in this Staff Working Paper
are those of the authors and do not
necessarily reflect the views of the International Organisation
of Securities Commissions or its
members.
For further information please contact: [email protected]
Staff Working Paper: [SWP3/2014]
2 | P a g e
About this Document
87. The IOSCO Research Department is conducting research and
analysis around IOSCO Principles
6 (on systemic risk) and 7 (reviewing the perimeter of
regulation). To support these efforts, the
IOSCO Research Department is undertaking a number of
information gathering exercises
including extensive market intelligence in financial centres; risk
roundtables with prominent
members of industry and regulators; data gathering and
analysis; the construction of
quantitative risk indicators; a survey on emerging risks to
regulators, academics and market
participants; and review of the current literature on risks by
experts.
This holistic approach to risk identification is important in
order to capture those potential
risks that may not be apparent in the available data (i.e. not
necessarily quantifiable), or which
may be currently seen as outside the perimeter of securities
market regulation, but
nonetheless significant.
Two potential areas of financial innovation that have seen
strong growth in recent years are
peer-to-peer lending and equity crowd-funding. These industries
affect a number of key global
initiatives outlined by IOSCO and the G20. These include the
diversification and broadening of
markets; mechanisms aiding in the long-term financing of the
real economy; and the
promotion of wider stability within the financial system.
As a first step towards engaging with this issue, the IOSCO
Research Department, has
88. undertaken a review of these practices and how they might
relate to IOSCO, its members and
their regulatory remit and the wider real economy. This IOSCO
Staff Working Paper “Crowd-
funding: An Infant Industry Growing Fast” presents a review of
financial return crowd-funding,
as well as key insights on the main implications for users. It is
the first publication of its kind in
tying together a global overview of the industry along with a
mapping exercise of the global
regulatory landscape.
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Table of contents
Executive Summary
...............................................................................................
........................ 4
Introduction
...............................................................................................
................................... 8
Chapter 1: Nature of the industries
............................................................................................
12
89. Chapter 2: Benefits and Risks of Financial Return crowd-
funding .............................................. 21
Chapter 3: Current regulatory regimes and trends
..................................................................... 29
Chapter 4: Analysis of potential systemic risks and investor
protection concerns .................... 33
Chapter 5: Crowdfunding in the context of the IOSCO
Objectives and Principles ...................... 47
Chapter 6: Conclusions and next steps
....................................................................................... 50
Annex 1: Regulatory practices by country
.................................................................................. 52
Annex 2: List of figures and tables
..............................................................................................
63
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Executive Summary
Introduction
• Crowd-funding is an umbrella term describing the use of small
amounts of money,
90. obtained from a large number of individuals or organisations, to
fund a project, a
business or personal loan, and other needs through an online
web-based platform.
• Crowd-funding has four subcategories: Donation crowd-
funding, reward crowd-
funding, peer-to-peer lending and equity crowd-funding. This
document is a factual
report analysing peer-to-peer lending and equity crowd-
funding, being forms of
market-based finance that are collectively referred to as
“financial return crowd-
funding” or “FR crowd-funding”.
• The online nature and the usually small size of investments of
FR crowd-funding makes
this industry different from private placement or other similar
activities.
Nature of financial return crowd-funding
• FR crowd-funding globally has grown rapidly in the last 5
years, with data suggesting
that the peer-to-peer lending market doubles each year. It
accounts for approximately
$6.4 billion outstanding globally.
• FR crowd-funding market is worth over $1 billion in the USA,
the UK and China, and is
taking off in many other jurisdictions across the world.
• FR crowd-funding has three main business models: the client
segregated account
model, the notary model and the equity crowd-funding model.
The major difference
91. between the two peer-to-peer lending models, the client
segregated account model
and the notary model, is that in the latter a bank originates the
loan unlike the former
where the platform originates the loan. The third model, equity
crowd-funding, is
different from peer-to-peer lending as it allocates stock equity
to investors, with the
financial return coming in the form of dividends and/or capital
growth.
Key benefits
• The primary benefit of FR crowd-funding to entrepreneurs
seeking to raise funds as a
form of market-based finance is the ability to raise capital, in
most cases without giving
up large parcels of equity interest.
• FR crowd-funding spreads risk – the majority of investors are
individuals (although
some institutional investors are beginning to enter the market)
with funding requests
filled in much smaller incremental amounts.
• Another benefit is the lower cost of capital and higher returns
to investors – crowd-
funding provides a low cost alternative to channelling savings
to the real economy,
usually at rates lower than those attainable through traditional
funding avenues.
Additionally, venture and seed capital requests are difficult to
access in the current
economic environment. Crowd-funding alternatives provide an
affordable and
attainable option for raising capital.
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• FR crowd-funding can help economic recovery by financing
small and medium
enterprises (SMEs) which are a key engine of economic growth.
Helping those entities
more efficiently access capital for their development and
expansion can contribute to
job creation and economic recovery.
Key risks
• Risk of default: In equity crowd-funding the risk of
default/investment failure is
estimated to be around 50%. In peer-to-peer lending there has
been a concerted effort
by the industry to reduce default rates, which reached a high of
30% in 2009. While
there has been some success in reducing the default rate, the
actual rate of default in
many cases is unknown as many of the platforms have only
opened in the last three
years and the loans originated by them have only recently
started to mature.
• Risk of platform closure/failure: Despite the short life of
crowd-funding, there has
already been a case of a peer-to-peer lending platform closing
leaving no data on
contracts behind and resulting in 100% investment loss.
Investors bear a higher risk
than in many other types of investments.
93. • Risk of fraud: This is compounded in both peer-to-peer
lending and equity crowd-
funding by the anonymity created by the online aspect of these
industries. This is the
case for both the lender/investor and borrower/issuer parties,
whereby the
opportunity to defraud is an ever present reality.
• Risk of illiquidity: Investors cannot sell their participations as
there doesn´t exist a
secondary market. This lack of liquidity in FR crowd-funding
could be a risk for
investors if they are not aware of this.
• Risk of cyber-attack: The online nature of FR crowd-funding
makes FR-crowd funding
vulnerable to the risk of cyber-attacks.
• Lack of transparency and disclosure of risks: Risks tend not to
be disclosed until a
lender/investor becomes a member of the platform.
Regulatory regimes
• The regulatory regimes are dependent on jurisdictional choices
in regulation.
• There currently is no cross-jurisdictional harmonisation in the
regulation of these
industries.
Peer-to-peer lending is regulated in five different ways. These
are:
1. Exempt/ unregulated through lack of definition
2. Platforms regulated as an intermediary
94. 3. Platforms regulated as a bank
4. The US model: there are two levels of regulation, Federal
regulation through the
Securities and Exchange Commission (SEC) and state level,
where platforms have to
apply on a state-by-state basis.
5. Prohibited
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Equity crowd-funding is regulated under three main regimes.
These are:
1. Regulation that prohibits equity crowd-funding completely.
2. Equity crowd-funding is legal but the regulation of the
industry creates high barriers to
entry
3. Regulation may allow the industry to exist, but with strict
limits
• One approach to the regulation of FR crowd-funding by some
jurisdictions looks to
designate the markets as exempt or to lighten the regulations
around the issuance of
shares through equity crowd-funding in order to promote SME
growth.
Analysis of potential systemic risks and investor protection
concerns
• Drawing on the past work of the IOSCO Research Department
95. peer-to-peer lending and
equity crowd-funding is analysed to establish if they pose a
systemic risk. The main
conclusion at the time of writing is that the industries do not
pose systemic risk yet.
The following impact factors are relevant in this analysis.
• Size: The peer-to-peer lending market is very small,
accounting for only a fraction of all
credit provided to the real economy. However, it is an industry
that is almost doubling
each year in size. This means that even though the current
market size is too small to
cause systemic risk, it has the potential to grow to a sizeable
market in a short amount
of time.
• Liquidity: There is a lack of liquidity in peer-to-peer lending,
with relatively few
platforms providing a secondary market on which to sell loan
portfolios. Equity crowd-
funding has even less liquidity as there is no secondary market
for shares in start-ups
due to the inability to accurately judge the value of the equity
shares. This is a problem
for investors who want to liquidate positions.
• Cross-border activities and implications: A few platforms have
chosen to open their
business to other nationals, introducing cross border
complexities. Questions are yet
to be answered in regards to contract law enforcement across
jurisdictions. Further in-
depth work is required to understand the legal implications of
cross-border
96. operations. Therefore, cross border complexities could become
a source of systemic
risk in the future.
• Interconnectedness through securitisation practices and bank
involvement: There
have been recent examples of the securitisation of peer-to-peer
unsecured loans. This
opens the market to new investment, but also opens the rest of
the financial market to
exposure to packaged loans which are predominately unsecured
in nature. Since this
segment of the market is extremely small, it is not currently a
source of systemic risk.
In conclusion, the FR crowd-funding market does not present
systemic risk to the financial
system at present. However, rapid future growth of the market
could change this. There is
also a concern for investor protection raised by these financial
activities.
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The application of the IOSCO Objectives and Principles
• IOSCO’s Objectives and Principles of Securities Regulation
provide a good regulatory
foundation for peer-to-peer lending and equity crowd-funding.
Next Steps:
• Although no currently a systemic risk, these markets do pose
problems for investor
97. protection which need to be addressed.
• Further monitoring and research is required. There is a need
for further research, inter
alia, in developing indicators based on hard data.
• In order to exploit the benefits of FR crowd-funding while
mitigating its risks a
balanced regulatory approach will be required. The balance will
need to be established
by each regulator as it depends on political choices and the
regulatory regime, which
varies across the globe.
• At the same time there might be a need for the international
harmonisation of
regulatory requirements given the possible cross-border nature
of the FR crowd-
funding market. IOSCO is well positioned to examine the need
for global principles or
standards in this area.
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Introduction
Crowd-funding is an umbrella term describing the use of small
amounts of money, obtained
from a large number of individuals or organisations, to fund a
project, a business or personal
loan, and other needs through an online web-based platform.
98. Peer-to-peer lending is a form
of crowd-funding used to fund loans which are paid back with
interest. Equity crowd-funding is
the raising of capital through the issuance of stock to a number
of individual investors using
the same method as crowd-funding.
Peer-to-peer lending and equity crowd-funding platforms are of
particular interest to IOSCO
and its members because they are growing rapidly and are
accessible easily to both retail and
sophisticated investors alike. Various IOSCO members have
recently published or are in the
process of publishing guidelines, policies or reviews on
developments in their jurisdictions.
Peer-to-peer lending and equity crowd-funding have also drawn
the attention of governments
who wish to encourage the growth of small and medium
enterprises (SMEs), which has led
some governments to actively seek to lend money through these
platforms, or implement
regulatory changes through the use of exemptions or regulation
reviews of these markets.
Types of crowd-funding2
Crowd-funding can be divided into four categories: social
lending/donation crowd-funding,
reward crowd-funding, peer-to-peer lending and equity crowd-
funding.3 This is shown in
Figure 1.
Figure 1: The various forms of crowd-funding activities
99. Source: IOSCO Research Department
2 Crowd-funding should not be confused with micro-financing
(for example, such as the Grameen Bank style of micro-
lending).
Microfinancing is predominately a bank based exercise,
whereby the bank is the sole provider of the loan, is the
originator of the
loan and bears the risk of the loan. As such, it does not draw on
the principles of many investors funding small parts of a
required
capital need.
3 Pierrakis, Y and Collins, L (2013) Nesta…Banking on Each
Other: peer-to-peer lending to business: evidence from Funding
Circle,
[pdf] Available at:
http://www.nesta.org.uk/library/documents/Peer-to-peer-
lending-report.pdf, p11
Crowd-funding
Social
Lending/Donation
Crowd-funding
Reward Crowd-
funding
Peer-to-Peer
Lending
Equity Crowd-
funding
100. Financial Return Crowd-funding
(FR Crowd-funding)
Community Crowd-funding
http://www.nesta.org.uk/library/documents/Peer-to-peer-
lending-report.pdf
9 | P a g e
Social lending/donation crowd-funding and reward crowd-
funding are a way of fundraising for
charitable causes, for example through angel investors, or pre-
paying for a product from a
business, for example NakedWines.com.4 These two categories
of crowd-funding can be
collectively referred to as “community crowd-funding” (see
Figure 1). The main difference
between these forms of crowd-funding and the other two that
are the subject of this report is
that they do not provide any financial return in the form of a
yield or return on investment.5
Consequently, peer-to-peer lending and equity crowd-funding
can be referred to collectively as
“financial return crowd-funding” or “FR crowd-funding”. Both
types of FR crowd-funding are
internet based. This paper focuses on peer-to-peer lending and
equity crowd-funding due to
the clear securities market implications and regulatory remit of
IOSCO members. It is
important to note the existence of the different subcategories of
crowd-funding, and not to
101. take crowd-funding as being synonymous with either peer-to-
peer lending or equity crowd-
funding only. Lack of such precision in legal documents could
lead to complications in the
implementation of rules by participants.
Peer-to-peer lending can be defined as the use of an online
platform that matches
lenders/investors with borrowers/issuers in order to provide
unsecured loans. This particular
form of crowd-based financing makes up the bulk of the FR
crowd-funding market considered
here. The borrower can either be an individual or a business
requiring a loan. It is
characterised by the ability of lenders to provide money for
small fragments of the overall loan
required by a borrower; these are called “loan parts” and can be
as small as £10.6 These loan
parts are then aggregated by the online platform and when there
is enough to cover the
required loan, the loan is originated and paid to the borrower.
The interest rate is set by the
platform. The borrower then pays back the loan with interest.
This interest rate is usually
higher than the savings rates available to the lender but lower
than a traditional loan available
to the borrower, though this depends on the borrower’s
evaluated risk. The interest is paid to
the lender until one of the following occurs: the loan matures;
the borrower pays it back early
or the borrower defaults.
Smaller peer-to-peer lending platforms also cater to niche
markets. These include, though are
not limited to, platforms with a specific focus specialising in
transactions in real estate
102. financing, venture capital, business-to-business, graduate
financing, funeral financing, art
project financing, technological start-ups or consumer-to-
consumer loans for transactions such
as eBay purchases.7
Equity crowd-funding is similar to peer-to-peer lending in terms
of an online platform. Many
individuals can invest in a business through the platform,
gaining an equity stake. These
4 Robinson, D. (2013) ‘Naked Wines raises $10 million for
expansion into US and Australia’, Financial Times [Online]
Available at:
http://www.ft.com/cms/s/0/8ef3ecdc-0a6f-11e3-aeab-
00144feabdc0.html#axzz2gOGVQUUF [Accessed: 01.10.2013]
5 Pierrakis and Collins, 2013, p11
6 FSA (2012) crowd-funding: is your investment
protected?[Online] Available at:
www.fsa.gov.uk/consumerinformation/product_news/saving_inv
estments/ crowd-funding [Accessed: 01.10.2013]
7 Verstein, A. (2012), "Misregulation of Person to Person
Lending", Lecturer and Other Affiliate Scholarship Series,
Paper 8, Available
at: http://digitalcommons.law.yale.edu/ylas/8, p 456
http://www.ft.com/cms/s/0/8ef3ecdc-0a6f-11e3-aeab-
00144feabdc0.html#axzz2gOGVQUUF
http://www.fsa.gov.uk/consumerinformation/product_news/savi
ng_investments/crowdfunding
http://digitalcommons.law.yale.edu/ylas/8
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