Crowd Funding: Organizing Finance the New Way

Crowd Funding: Organizing Finance the New Way

Surbhi Gosain (Bhai Parmanand Institute of Business Studies, India)
DOI: 10.4018/978-1-5225-3191-3.ch002
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Abstract

Financing is an essential element for running any organization without which an organization cannot even be created. With many new organizations coming up and foreign companies entering into the market competition has touched its peak. This is valid even for scenarios where companies have to face a cut-throat competition to get the investors for themselves. New and booming startups have to compete with already establish companies where they are generally less preferred as an investment option by the investors who eventually choose big companies because of their return. Thus, new methods of financing such as crowd funding are making their way into present day business environment. Crowd funding has been positioned as a viable option in line with traditional methods of financing such as venture capitalism and angel investments. Crowd funding has gain popularity among new and inexperienced entrepreneurs and for getting money to carry out social, cultural and environmental projects. Various crowd funding platforms have come up with different pricing and operational strategies.
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Background

Crowd funding is an application of crowd sourcing which is a sourcing model, where individual or organizers use e - platforms to reach others for their ideas and resources.

Pathak & Kaur (2016) see crowd funding as a way to “solicit funds” from others to accomplish their ventures or dream projects through online portals either in the form of monetary donation, exchange for a future product, service or reward. It provides an opportunity to small businesses and start - ups with to increase their social media presence, investment base, and funding prospects (Mollick, 2013). It has the potential to increase entrepreneurship by widening the pool of contributors that go beyond the realms of owners, relatives and venture capitalists (Shivaprasad & Kannadas, 2016).

Crowd funding can be categorized into four major categories as mentioned by Pathak & Kaur (2016); Sarkar (n.d.) -

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