A Framework for Ameliorating Risk in Australian University Crowdfunding

A Framework for Ameliorating Risk in Australian University Crowdfunding

Jonathan O'Donnell (RMIT University, Australia)
DOI: 10.4018/978-1-7998-3130-3.ch003

Abstract

Crowdfunding is a balance of risk versus reward. Crowdfunders take a public risk that they will fail to raise funds. Donors take the risk that the campaign will not be funded or that they will not see a return for their support. In an ideal world, both sides are rewarded through the development of something new. If the campaign is being run by a staff member at a large organisation, the organisation should consider a number of risks. These include legal risks such as corruption and misrepresentation, as well as reputational risks and risks relating to exploitation of staff. There is also the risk of funding foregone due to excessive caution regarding crowdfunding. This chapter uses universities in Australia as a case study to illustrate some of these risks. It analyses them through a framework for managing risk in business centric crowdfunding platforms. It contributes a new framework for ameliorating risk before, during, and after crowdfunding campaigns.
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Introduction

Crowdfunding - raising funds from a group for a project, typically using the internet - provides a new method for funding research at universities. This chapter focuses on the crowdfunding activities of academics at Australian universities in the scope of their institutional research commitments. It examines the risks for the individuals, the universities and the public in crowdfunding campaigns in Australia, using an existing framework for managing risk in crowdfunding services (Stack et al., 2017). Finally, to assist universities to address these risks, it provides a framework for ameliorating risk before, during and after crowdfunding campaigns.

The chapter does not seek to provide advice to academics who are undertaking crowdfunding in a personal capacity, or to provide advice to students or others affiliated with Australian universities. It focuses on crowdfunding as delineated through the employer-employee relationship of universities and their academics.

Restricting the discussion to universities limits the scope of this chapter to donation-based crowdfunding and rewards-based crowdfunding. While there are examples of universities using crowdfunding to raise equity, they are rare. Risks related to equity crowdfunding have been extensively discussed elsewhere (Cui & Zeng, 2016; Hornuf & Schwienbacher, 2017). The author has also not examined loan-based crowdfunding undertaken by universities.

The chapter begins by providing an understanding of the funding of research in Australian universities, of crowdfunding in general and of crowdfunding in Australian universities. It examines the literature on academic crowdfunding, risks related to crowdfunding in general and frameworks for understanding those risks. It describes the research undertaken for this chapter, including interviews and archival research. It outlines the difference between crowdfunding campaigns inside and outside of universities. It identifies risks relating to crowdfunding at Australian universities, using Stack’s framework of ill-intentioned and well-intentioned actors. It then provides a new framework for ameliorating those risks.

Key Terms in this Chapter

Crowdfunder: Person or group of people who conduct a crowdfunding campaign to raise funds.

Risk: The measure of the chance of harm occurring ( Mann & Blunden, 2010 ).

Breach of Contract: Failure to perform a contract, either in whole or in part ( Mann & Blunden, 2010 ).

Performance: Satisfactorily completing the terms of a contract. By inference, non-performance is not satisfactorily completing the terms ( Mann & Blunden, 2010 ).

Crowdfunding Campaign: The period when a crowdfunder is actively seeking funding.

Standard of Care: The benchmark for a person to avoid or alleviate the risk of harming others ( Mann & Blunden, 2010 ).

Crowdfunding Service: Organisations that facilitate crowdfunding via the internet. Their websites are often referred to as Crowdfunding Platforms.

Supporters: People who provide funds to a crowdfunding campaign. Also referred to as Backers. Supporters who receive a tax deduction for their contribution may be called Donors.

Fraud: Dishonestly gaining advantage ( Mann & Blunden, 2010 ).

Breach of Duty of Care: Failure to avoid or alleviate harm to others. The level of care required is measure by the standard of care ( Mann & Blunden, 2010 ).

Morality: Prescriptions regarding right and wrong behaviour ( Mann & Blunden, 2010 ).

Social Norms: Cultural expectations governing the behaviour of people ( Mann & Blunden, 2010 ).

Public Good: Things that are available to all (nobody can be excluded) and cannot be used up (use by one does not reduce the use of another) ( Mann & Blunden, 2010 ).

Crowdfunding: Raising funds from a group of people for a project or cause, typically using the internet ( Harms, 2007 ; Kappel, 2009 ).

Misrepresentation: Falsehoods that induce someone to enter into a contract. Misrepresentation may be fraudulent when it is intentional, innocent when it is unintentional and negligent when it is unintentional but there is a duty of care ( Mann & Blunden, 2010 ).

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