CQ 3: Can small business use the 'crowd' to attract funding?
3 important questions on CQ 3: Can small business use the 'crowd' to attract funding?
What are the 2 crowdfunding models?
- "Keep-it-All"
- where the entrepreneurial firm sets a fundraising goal and keeps the entire amount raised regardless of whether or not they meet their goal
- "All-or-Nothing"
- where the entrepreneurial firm sets a fundraising goal and keeps nothing unless the goal is achieved
How does the "All-or-Nothing" work on Kickstarter (max. 90 days)?
- When Kickstarter started in 2009, all the money raised went directly to the projects which were hand-picked before shown on the website
- Change in 2010: anyone could start a project and if the entrepreneur successfully meets the target-amount, 5% of the amount raised goes to Kickstarter
- if they do not meet their target, neither Kickstarter nor the entrepreneur would receive any money
What are the goals of crowdfunding campaign? (3)
- Funding
- one-time projects, events, or to raise start-up capital
- Kickstarter: 45 of 50 highest funded projects to entrepreneurial firms in 2012
- Demonstrate demand for or interest in product
- many products are still proto-types
- may lead to funding from more traditional sources
- Marketing purposes
- e.g., media and press follow crowdfunding campaigns
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