Crowdfunding: Finding the Optimal Platform for Funders and Entrepreneurs

Abstract

As a steadily expanding source of venture capital, crowdfunding has become an alternative to traditional funding sources, such as banks and financial investors. The phenomenon of crowdfunding is represented by a growing number of Internet sites, here called crowdfunding platforms, devoted to the service. In this article, we investigate crowdfunding and their payout models, which are standard components on crowdfunding platforms. We consider the perspectives of both entrepreneurs and funders to determine the most attractive combination of models found on crowdfunding platforms. Our findings indicate that the most popular crowdfunding platforms, at the time of this study, reflect the preferences of entrepreneurs. The funders’ favoured crowdfunding model, which we call the equity model, is not currently found, in combination with the often-grouped, non-financial crowdfunding models of pre-order, sponsoring, or reward, on any of the top platforms. Thus, the research identifies a new market for crowdfunding platforms. A compromise is the art of dividing a cake in such a way that everyone believes that he has got the biggest piece.