The Value of Crowdfunding: The Significance of Community-Financed Projects Beyond the Act of Financing

Abstract

This chapter investigates the phenomenon of “Crowdfunding”, or the strategy of acquiring seed money with the help of the crowd of Internet users. This phenomenon has been made possible by societal and economical changes and, of course, technological innovations associated with “Web 2.0”. Crowdfunding is closely related to Crowdsourcing, for which reason both phenomena are discussed. This chapter seeks to define the concept of Crowdfunding, and based on this provides a more in-depth analysis of Crowdfunding functions for entrepreneurs beyond the act of funding. Crowdfunding (quite similar to Crowdsourcing) entails four key functions: providing feedback or rather a transfer of knowledge, network building, evaluation of marketability and acquisition of first purchasers. Furthermore, the focus is on users as well in that this chapter will similarly address the question why users spend both time and money on something without receiving an adequate benefit for it. In respect of this, attention will be paid to the question why Crowdfunding, unlike Crowdsourcing, to date has not been criticised seriously.