If the crowdfunding models are properly regulated and supervised, there is scope for funding of enterprises. The risk factors should be clearly explained up-front, and fraudsters and those trying to hoodwink investors need to be kept out.

i think one needs to also look at the type of finance associated with crowdfunding - the legal etc obligations.

there are various financial instruments, that vary in their legal aspects and rights/ privileges (distribution of profit etc), like debt versus equity

there are obvious similarities between crowdfunding and ordinary financial markets.

there are also similarities between crowdfunding and private equity

both crowdfunding and formal financial markets involve multiple investors

both crowdfunding and formal financial markets may have online platforms

hence the differentiating factor i is likely regulation and law - there are certain privileges and agreements made in the context of crowdfunding that is not feasible for formal finance. SEC regulation comes to mind.

i do not really see anything that crowdfunding would provide to corporates, that the conventional markets do not already provide, and it may open the door to unethical behaviour

In that case, it is not crowdfunding, it is co-operative endeavour or it is a crowdborrowing. Crowdfunding for small-scale businesses or for entrepreneurial venture is possible if and only if the profit will come from social product marketing. Again, spm is based on a social cause in the face of market failure. What people are trying to say about idea marketing, for unmet need/demand is also a variant of social marketing. Nash bargaining solutions can take different forms. S game-theoretic explanation to the solution is possible only in case of a trade off between social vs private equity teaching an equilibrium where there is a positive sum game. Nash bargaining solutions must be positive sum. If hundreds buy Pegouvian coupon and proceeds are used to start up a social product organization such as a cancer hospital or Pathfinder' s Smiling Sun keeping 12% growth profit or contributory reinvestment fund, we do not need a perfect Nash eqm. Now I feel that many different concepts are coiled together to make a definition of crowdfunding. It is not a pvt loanable fund by definition. So there is no question of Nash bargain solution to a private business profit bargaining. Regerences are open to improve. There is a term used to describe this point: Contributory Investment Fund (CIF) where public at large can contribute. In that sense it apparently seem to be crowdfunding. Defining crowd & defining volunteers (we bought one acre land on the Moon for a buck in USA) to open a business organization. The V-M-O-S paradigm is for social product marketing (and of course producing). Nash bargaining solutions are achieved at even satisficing level. Thanks to all.

i am not sure whether it must be social cause driven. it may be social, and it may be marketing driven, but i am not sure whether it would classify it as social cause only

the difference between crowdfunding and private equity (online private equity for example) may simply be an investment in the equity of the company versus a forward purchase of the products of the firm. the company does not necessarily offer its equity for sale, but offers something innovative and customers are willing to purchase it up-front - pre-order

Nature of funding is immaterial to the venture - social, not-for-profit or for-profit, so long as the investor and or fund provider is aware of the purpose for which s/he is funding.

Crowdfunding is one of the latest avenues for raising funds. If the business model is unique , feasible and viable, like-minded people can chip in with their contributions to be a part of the venture. Financers have to understand the risks involved and take the plunge.It could be startups only hope in certain high tech businesses.

There is a fundamental misconception in society that a business venture benefits only to the business owners. While a profit becomes necessary for the business to carry on their operation, it is primarily the society, which draws benefit from a venture, in terms of availability of novel products and services /jobs etc.

Hence, if an enterprise can demonstrate how its activity can benefit the society in exponential manner, like catering to some essential needs to an under-developed area/ demography, then the enterprise may have a valid claim for crowdfunding.

However, once again, an ethical claim may not be always legally tenable, and the legality depends much on the wisdom of law-makers from country to country.