What kind of innovative start-ups are financed through crowdfunding?
Please reply
Crowdfunding is one of the newer ways of funding a startup(s). So, some entrepreneurs put up a detailed description of their businesses on a crowdfunding platform. They mention the goals of their businesses, plans for making profits, how much funding they need and for what reasons and then consumers can read about the business(es) and give money if they like the ideas. Anyone can contribute money toward helping a business that they really believe in. Actually, we can say that there are some business ideas that are perfect for crowdfunding: Original tech gadgets; Independent books; Home cooking tools; Local Service businesses; Unique home inventions and etc.
There are various types of crowdfunding such as donation-based crowdfunding, equity-based crowdfunding, rewards-based crowdfunding
I don't think there is a rule...anything that sounds interesting. A couple odf days ago I read about Croatian guy getting financed through crowdfunding for " make - it- yourself" cell phone.
The most important thing is that it is attractive for a reasonable number of investors, that is to say that it warns of its benefits without ambiguities, thus the innovative proposals will be those that have more possibilities of being financed.
off-course, Sense of Innovation behind the Idea of Business entity. Crowdfunding is basically a indirect investment for getting a attractive return on it. Because of that, it considers toe to head of business strategy (Not a single factor game) to create win-win situation for company and investors too.
Paul: Usually the process of crowdfunding is used for a new idea or a new product when the inventor doesn't have enough money to fully develop the new idea or product to the consumer market.
There are also different types of crowdfunding, so the type of crowdfunding should match the idea or product.
The best answer in my opinion is "it depends". Since the differences between crowdfunding platforms are huge.
- You have peer-to-peer lending platforms that are usually platforms where people or startups turn to when the bank doesn't see any opportunity in the startup or the risk is seemingly too high.
- Crowdfunding in equity, in return for X $ you get X in stocks/equity --> usually not a favorite for young start-ups, might be very costly in the end.
- Crowdfunding in return for a product. Think of Kickstarter, usually preferred when it's about a tangible product. However, the "Coolest Cooler" example shows that you need to think thoroughly about the costs involved.
- Crowdfunding with a fixed % return in X time --> usually intermediary platforms are involved that assess the risks for investors. In my opinion this might be for the more "conservative" or CEO's that are a little bit older, as new ways of crowdfunding might be too much work/ahead of them.
Than your question: "Which innovative start-ups are financed through crowdfunding"
This totally depends on:
- the investor's interests,
- the intermediary companies involved that try to "sell" the investment,
-the Herding effect (when people notice a startup being funded rapidly, they start funding as well)
Startup mit der rechtsform einer genossenschaft werden in italien von den sogenannten mutualitätsfonds (italienisch: fondi mutualistici di promozione cooperativ) finanziert, das ist eine besondere form von crowdfunding, weil die mutualitätsfonds von allen bereits bestehenden genossenschaften einen anteil von 3% der bilanzgewinne einsammeln und dann diese finanzmittel zur unterstützung von förderungswürdigen genossenschaftlichen neugründungen verwenden.
NB: weiterführende informationen und details sind unter meinen papers auf researchgate.net veröffentlicht.
Any idea for a product or service can get people (or crowds) to fund if it is sufficiently interesting and addresses a perceived need. I have seen a whole range of business ideas being funded via crowdfunding.
As I taught courses on technology, innovation and entrepreneurship, I have been actively following crowdfunding as a phenomenon. Through crowdfunding all sorts of businesses have raised funds and are continuing to raise funding. They range from food products like chocolates, coffee, alcoholic drinks, to a range of technologies such as AI, to name just one
One idea that got funded is a technology that generates electricity from foot-steps -- people walking on certain paths on which the technology has been installed generate electricity. My alma mater Birmingham University will soon have an area where people walking along a path on a certain area on the campus will generate electricity. Another allows one to swap one currency for another currency, say Euro for US dollars or British pounds, saving on transaction or currency exchange costs. Yet another allows a person to transfer money to someone in another country. A company has obtained funding for developing electric cars whilst another has obtained funding for developing low cost small jet aircraft for transport. Whilst on the subject of electric cars, another company has obtained funding for new type of battery for use in electric cars. The list is endless.. and I hope it will remain so. The important $64 question is of course this: will the investor get his or her money back or more interestingly, will it be profitable?. I am convinced that some will be very profitable indeed
Another way to think about this question is to ask:
What founders options for start-up investment lead them to consider crowd-funding as the best option?
No bootstrap:
1) lack access to personal investment funds (that can be lost)
2) need current income
No funding through angels or family rounds:
No bank loans (could be due to limited assets (for security) or credit worthiness
No funding through Federal or State 'small business' programs
In conclusion, we look at the types of founders, and business ideas, fit this profile:
- Early in their entrepreneurship journey (up and coming)
- Independent, hungry and driven to succeed
- Outside the business and government establishment
- Boom or bust, high-leverage business opportunities
- Very early stage (e.g., no revenue or team)
This seems like the primary type of profile I would expect to see in crowd funding models.
The secondary model I would expect is founders with more mature models (e.g., already have a product and revenue), using crowd-funding as a form of marketing and business development. This is like a foreign firm also listing on a US stock exchange to gain visibility.
This answer mirrors the types of thinking I do in funding my own firm, US Advanced Computing Infrastructure, Inc. (DM for more info)
Hope it helps!
Jeffrey Cohen
@chicago_quantum (twitter)
In the scope of current developments: It cpuld be easily rephrased to: What types of founders are getting financed by crowdfunding.
Currently the focus of academica resaerch aims on quality Signaling (soft skills) of the founders and some indicator metrics to success.
(Ammount of CEO Experienced founders, ammounts of patents pending).
This however is strange as the StartUps before the Growth/Scalability phase which makes them mature to venture capital investments usally have 0 patents and 0 experienced CEOs.
KR Mahir
According to Eric Ries, the creator of the Lean Startup Methodolgy a startup is a human institution (RD: company, business) designed to create a new product or service under conditions of extreme uncertainty. Because extreme risk is involved the financiers must be willing to take that risk and have enough belief in the startup (product or service) to give it a chance because of all sorts of 'profit' reasons than only financial. The main focus of a bank is usually is financial. Crowdfunding goes beyond that and adding to that it is organizing financing in a frugal, often easier way, where more financiers are involved and the risk is spread. So any start-up can be considered, depending on the financiers/donors or the platform. On platforms such as Kickstarter, Indiegogo, Causes (non-profit), RocketHub (venture capital), Patreon (creators), GoFundMe (personal), Circle Up (equity), LendingClub you can find different kind of startups. Even banks are now setting up crouwfunding platforms to finance projects which maybe are deemed to risky for one person or institution where a broader support base is needed.
Crowdfunding depends on the owner(s) of the business if he feels that only one source of getting investment could be demanding on the business and the risks involved in the business could be shared by many people. Inventions and innovations are better be incorporated into the business through the cooperation and coordination of many investors to the business.
When crowdfunding began it was focused on projects of low amount projects. As far as the crowdfunding business model is evolving there are crowdfund options of bigger amount.
https://en.wikipedia.org/wiki/List_of_highest-funded_crowdfunding_projects
There are various kinds of crowdfunding. Some of them are purely investment and equity driven, while some are philanthropic in nature where in support is provided for NGOs and NPOs and other such causes. So it really depends on what you are looking to start. It needs to be innovative, attractive, and must have some strong USPs in comparison to other ventures before it. It should also be something feasible financially and otherwise.
Crowdfunding is a recent paradigm in the arena of obtaining capital, whereby business Start-Ups and established businesses, charities and other initiatives may seek to generate funds publicly online amongst a range of potential private investors. The aim is to utilise this ‘crowd’ by raising lesser amounts of money from many people.
Mentioning investing, the figures dont Match, i dont see how an 5-6% return or equity share into an Startup could be an investment with PD and costs for the Campaign, even an successfull 20% growth startup and an uncertain exit.
Typically not many for a start. Social enterprises have a disproportionate dependency on crowd funding. And entrepreneurs closer to the 'inventor' end of the spectrum.
Startup fails due to any reason, there is not a fixed list of reasons that cause failure. In fact, it depends on the nature of a startup.
First I will talk about the secret behind any startup becomes the next successful shot.
1)The startup has a great product (not a great idea) and the right mindset to deliver it to the right audience at the right time.
2)It is lead by a great mind(s) who can see (Honestly) where is the friction and fix it immediately.
3)Sufficient fund to run until it will generate positive cash flow.
If any startup full fill all three at the same time, no one can stop it, it will thrive and will success anyhow.
Otherwise, founders start finding a list of reasons to give up, length of the list and hence number of reasons depends on the level of their frustration.
Suggest you get more information about startups at this blog - https://clockwise.software/blog/top-tech-startups-conferences/
Actually ... following the beat the market idea , this is what most research was conducted in the past decade, so there is already quite some data ... the gained knowledge is ... questionable.
Most start ups dont have delieverable products, neither prototypes, nor a cashflow history. Neither funding. :)
Crowdfunding is one of the newer ways of funding a startup(s). So, some entrepreneurs put up a detailed description of their businesses on a crowdfunding platform. They mention the goals of their businesses, plans for making profits, how much funding they need and for what reasons and then consumers can read about the business(es) and give money if they like the ideas. Anyone can contribute money toward helping a business that they really believe in. Actually, we can say that there are some business ideas that are perfect for crowdfunding: Original tech gadgets; Independent books; Home cooking tools; Local Service businesses; Unique home inventions and etc.
There are various types of crowdfunding such as donation-based crowdfunding, equity-based crowdfunding, rewards-based crowdfunding
i would refer word 'innovative' used in question as technological startups which are financed through whatsoever (thru crowdfunding or angel investors etc) can succeed if contain some genuine and creative idea.
Start-ups are high-risk enterprises. Their success depends on many factors. One of them is the use of risk finance instruments.
In my opinion, startups developing innovative business ventures based on innovative technologies or innovative products, services, innovative logistics etc. are financed through crowdfounding and other forms of social external financing of investment projects available on the Internet. For this type of investment projects it is difficult to obtain financing from banks in the form of traditional loan, credit and para-credit instruments. Most banks have not yet developed multifactorial models of analysis and precise measurement of credit risk for this type of innovative investment projects planned for implementation by startups characterized by a high level of innovation, low fixed capital and a short history of functioning on the markets.
What do you think about this topic?
What is your opinion on this topic?
Do you agree with me on the above matter?
Please reply
I agree with your opinion. I think that apart from banks there are more and more possibilities of financing start-ups. It is mainly private business, EU funds and various acceleration programs.
Dear Colleagues and Friends from RG, In the context of the above discussion, I am asking for information whether research is being carried out, or are the results of research on correlation of issues of effective development of Internet-based, innovative startups and technology companies and their financing through crowdfunding or other forms of external social financing available on the Internet?
Please reply
- Badges
- Science topic
- Similar topics
- Econ
- Innovation Economics
- Innovation