Crowdfunding creates funds for new projects by using internet and social media. This can benefit small business projects to obtain their required funds. A project receives small investments from wide range of individuals through web advertising and social media. The individuals (investors) who have invested in the project may receive incentives such as discounts on the products, early opportunity to purchase their products, inclusion of their name in the list of contributing founders etc., so, they are not purchasing the share of the company. Crowdfunding avoids going to the banks, friends and family to get funds. It also avoids giving up partial ownership of their company. The websites like www.rockethub.com, www.peerfunding.com, www.kickstarter.com are some of the examples of crowdfunding.
Crowdfunding is mainly useful for new entrepreneurs. It helps them to raise funds for the support of their projects and provides protection to the investors from fraudsters and it has appropriate rules from the government. This paper focuses mainly about working of crowdfunding, different types of crowdfunding platforms, status of crowdfunding in different countries and strengths and weaknesses of crowdfunding.
The Working of Crowdfunding is based on the collaboration between investors, intermediaries and entrepreneurs. Investors are a large number of ordinary people who can donate small amount of money for the ideas they find interesting. Intermediaries are crowdfunding websites. These websites allow investors to invest money in the projects they are interested in. These websites connect investors and entrepreneurs. Entrepreneurs are who asks finance for their projects. Entrepreneurs post their description of the project in a crowdfundin...
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...ublicly can easily be stolen.
• It is only internet based. Entrepreneur lacks advice.
• The startup companies (funded through crowdfunding) are riskier and failure rate is very high.
Crowdfunding is valuable and useful tool in today’s World. It has many advantages. The weaknesses can be exploited and can lead to a better system.
References:
Colgren, D. (2014) The Rise of Crowdfunding: Social Media, Big Data, Cloud Technologies. , 96(4), 56-57.
Salzsieder, L., & Cornell, D. W. (2013) A Critical Look at THE JUMPSTART OUR BUSINESS STARTUPS ACT. , 83, 18-27.
Turban, E., & Volonino, L. (2013). A look toward the future of information technology. Information technology for management advancing sustainable, profitable business growth (9th ed., ). : J. Wiley & Sons.
Jegeleviciute, S., & Valanciene, L. (2013) Valuation of Crowdfunding: Benefits And Drawbacks, 18(1), 39-50.
...y expand their sales base by having smaller businesses sell their products where it would be economical unfeasible for them to set up a branch. Practitioners such as bankers can provide support in the form of soft money to new businesses such as partial grants which do not have to be paid off until the business reached a certain size or level of profitability. (Disabilitymeansbusiness.com 2013)
Kickstarter serves as an active forum, where fans not only can connect and observe what their favorite artist is currently involved in, but also fans can provide valuable feedback and express their necessity or hatred for a particular project. After the failures of the dot-com bust, a new economic and social platform emerged within Web 2.0. Internet users are thus granted the ability to contribute to a participatory culture, and now more than ever user contributions
Information Technology (IT) is a foundation for conducting business today. It plays a critical role in increasing productivity of firms and entire nation. It is proven that firms who invested in IT have experienced continued growth in productivity and efficiency. Many companies' survival and even existence without use of IT is unimaginable. IT has become the largest component of capital investment for companies in the United States and many other countries.
Adelman, P. J., & Marks, A. M. (2010). Entrepreneurial finance. (5 ed.). Bedford, Texas: Prentice Hall.
...hey can provide the borrowers with a constant flow of income that can help them pay off the loan back and become eligible for any kind of banking services. If Micro-finance institutions construct themselves successfully enough to offer more services to the low income client market, and have the financial comfort to offer the appropriate interest per client income, it may be one of the strongest forces in alleviating poverty. If the institutions are constructed well enough to break even, or make a small profit, they become a huge beneficial investment of wealthy businesses and investors. When run as a sister company to other businesses, or by outside lenders on an online site, micro-finance institutions can provide opportunities, education, and a healthy flow of income to poverty stricken individuals for the rest of their lives, and slowly help alleviate poverty.
This paper describes about the lending based crowdfunding. “In April 2012, President Obama signed the Jumpstart Our Business Startups” (Best, J., & Neiss, S., 2012). JOBS Act is legal for obtaining funding through equity and lending based crowdfunding. It makes the individuals who are going to start their business will have a chance to expand their business by collecting funds through online from the individuals. Here in crowdfunding the “crowd” as a loan officer i.e., they provide or invest the money on some project to complete it. This makes the crowdfunding for ultimate source to complete ...
Before 1980 the only way to find the investment for any startups was banks and in 1980's there were investors who were interested in technology business. In this 20th century, small and mid-sized enterprises (SMEs) have a low income and are not easy to get capital or financing from any financial institutions or bankers, but startups have an option to find their investments through a strategy called Crowdfunding, a venture to raise money from various people. This review infers the content on influence of crowdfunding in small and mid-sized enterprises (SMEs). This review emphasis on how crowdfunding is growing in SMEs, what are advantages and disadvantages of crowdfunding and a case study on how a company from Indonesia raised their money using crowdfunding.
Access to capital and credit at various stages in the business life cycle is identified as the major hurdle by the entrepreneurs. For many small firms and most start-ups, the personal funds of the business owners and entrepreneur and those of relatives and acquaintances constitute as the major source of capital. For many small businesses, especially during the early years of their operation, credit is simply not available. For many others, the limited available credit is not through bank loans. Due to this many of them rely on multiple credit card balances and home equity loans as major sources of credit for start-up firm. Because banks are bound by laws and regulations to prudent lending standards that require them a risk management assessment for each loan made. These regulations were made more vigor during the late 1980'' and early 1990 . Banks always found that lending to manufacturing firm with hard asset such as property, equipment, and inventory has always been easier than lending to today's expanding service sector firms. Because the service sector firms own few hard asses, therefor lending judgment have to be based in terms of character, markets, and cashflow, which make it difficult to the bank to meet the regulations for the approval of the loan. Additional, the banking industry, as well as the entire financial sector of the
financing. They are often comparatively modest, in-order to help the founders get on their feet, build
Watching this video has taught me a lot of aspects to the business side of life. It is never easy to run a business, especially one with such high potential. I also know that the most important part of a business, and I can’t stress this enough, is the due diligence. Before entering into a market, you need to understand all aspects and understand how you will be presenting your product. Presentation and unified message is everything to an investor and I feel that by watching STARTUP.com, I learned a bunch of details which I did not know before. Govworks is an excellent learning experience to acknowledge how tough the real world is.
Crowdfunding is a way for bringing capital up in little sums from an expansive gathering of individuals utilizing the Internet and online networking. Unlike funds from venture capitalists or angel stakeholders, the capital raised through crowdfunding does not really purchase the lender a share, and there is no assurance that it will be reimbursed if the project is fruitful. Instead, people are requested to make micro investments or contributions to causes and projects they believe in, thus allowing the work to be finished.
Turban, E. (2009) Information technology for management : transforming organizations in the digital economy. 7th ed. Hoboken: John Wiley & Sons Inc.
The Impact of Information Technology on Individuals, Society and Organizations Information systems and information technology are important in supporting, maintaining and enriching many aspects of livings. They bring benefits to lives of individuals, operations of business and the functioning of society but there are also drawbacks associated with technology and information system. Both good and bad impacts of information system and technology to individuals, organisations and the society will be discussed in detail in the following paragraphs.
Crowdfunding is a new sector and is still developing. It is an exciting opportunity for many of the new, small and medium scale industries whose proposals are rejected by the banks.It may be confusing to most of the users as it is presented in many ways. We have there aspects in Crowdfunding investments or donations, platform, project creators. Crowdfunding works as first the idea or the proposal of the person is uploaded into the platform in which all the donators are registered. The donators view the proposal of the person and then decide to invest o...
An important term that is cropping up everywhere nowadays is “Microfinance”. It is important for every person interested in the field of finance to be aware of this term, as in the coming days Microfinance is expected to be one of the brightest and the most appealing sector of the Indian Economy.