The Crowdfunding Market, Models, Platforms, and Projects

Introduction

Crowdfunding is a rapidly emerging system for funding a wide variety of projects from art-based campaign to technology related initiatives. Although, artistic and social projects have become successful in the earlier period of crowdfunding, recently campaigns concerning small and medium sized start-up companies, software programs, real estate and other kind of business have become popular (Review of Crowdfunding Regulation, 2014). Crowdfunding enables individuals to actualize their original ideas and social-based projects that they cannot find capital easily from other kind of financial sources. That is why it is defined as “funding escalator” for start-up companies and support to form democratic and collective financial system (Unleashing the potential of Crowdfunding in the European Union, 2014). Today, crowdfunding market includes profit and non-profit projects in the area of business, technology, art, film, music, publishing, journalism, real estate and social cause (Milosevic, 2015; Martínez-Canas et al., 2012). Business and entrepreneurship remained as the most popular crowdfunding category, collecting $6.7 billion in 2014, which represents 41.3% of total crowdfunding volume. Social causes at 18.9% ($3.06 billion), films and performing arts at 12.13% ($1.97), real estate at 6.25% ($1.01 billion), and music and recording arts at 4.54% ($736 million) rounded out the top five categories. (Massolution’s 2015 CF Industry Report, 2015).

This chapter focuses on the recently developing crowdfunding online communities, as free basis, open communities for innovative co-creation, that the new projects are offered and funded by large number of individuals from general public. Beugre and Das (2013) define the term “crowd” to include a group of people or a community, a social entity organizing resources to exploit an opportunity that adds economic or social value. Crowdfunding mainly consists of collecting funds through small investors in return for tangible or intangible benefits (Ordanini, Meceli, Pizeli, & Parasuraman, 2011). Currently, 1250 crowdfunding platforms operate in the world. The crowdfunding market size rises from $6.1 billion in 2013 to $16.2 billion in 2014, increasing by 167%. It is expected that it would reach $34.4 billion in 2015 which is almost two times more than the existing volume (Massolution’s 2015 CF Industry Report, 2015). The chapter sheds a light to the current extent and dynamics of the growing crowdfunding market, introducing different models of crowdfunding, crowdfunding platforms and the projects that are crowdfunded. The analysis of the market is concluded by the foreseen future trends.