Prof Avil - Final

Crowdfunding can be regarded as a new method used in raising funds. The method is growing promptly around the universe. Globally, the method, crowdfunding platforms, was used to raise more than US$16B in 2014 while in 2015 more than US$32 B was raised. Crowdfunding is the way or process in which a lot of individuals regarded as the crowd contribute comparatively small amounts in terms of money with intentions to support businesses or projects. The crowdfunding is grouped into three ways which include rewards, debt, and equity crowdfunding generally. However, how much the method is useful to businesses and projects, it has not gained popularity amongst individuals worldwide. The biggest challenge to this that even people who are aware of it are not willing to learn how the term works. Most entrepreneurs do not appreciate it. In order for the crowding funding to grow, education is very vital. Particularly markets in the Middle East because the concept is novel compared to European and US markets.

Keywords: Crowdfunding, Rewards, Debt, Equity, Education

Crowdfunding is a term for describing the use of small amounts of money obtain from a great number of individuals and organizations to fund a project. Crowdfunding permits authors of for-profit generation, masterful, and social dares to finance their endeavors by drawing on moderately little commitments from a generally expansive number of people utilizing the web, without standard money related go-betweens. Crowdfunding has four subcategories such as donation crowdfunding, reward crowdfunding, peer-to-peer lending and equity crowdfunding.

Crowdfunding tasks can go incredibly in both objective and size, from little aesthetic activities to business people looking for a huge number of dollars in seed capital as a contrasting option to conventional funding venture. Though equity crowdfunding gives ventures the chance to collect capital from a huge base of financiers, many campaigns sometimes tend to be unsuccessful (Kuppuswamy and Bayus, 2016). 

Lukkarinen et al. (2016), carried out a research to find out the factors which contribute to the success of Crowdfunding project. The authors drew their research using equity and reward-based crowdfunding which is most used by entrepreneurs. Utilizing data from North Europe, from one of the leading platforms which facilitates crowdfunding, they explored factors which drove investors as well as the amount gotten from the equity crowdfunding promotions. The authors found out that besides some crowdfunding projects being successful, there are also other projects which are not successful and make a huge amount of losses. The results indicated that success of crowdfunding campaigns related to pre-identified crowdfunding campaign features as well as both public and private networks’ utilization.

In a study conducted by Kuppuswamy and Bayus (2016), to determine if someone’ contribution to someone else crowdfunding project matter? They considered the crowdfunding dynamics for project support for a given time. They proposed that individuals support crowdfunding project financially if they are assured that their support and involvement will result in an impact. Since perceptions of influence are positively connected to the objective proximity, they predicted that project support using crowdfunding increases when the project funding heads to its target aim. Furthermore, since motivation reduces after the objective is reached, they further predicted that crowdfunding helps significantly decrease when target objective is attained. They found the above with strong reference for hypotheses gotten from the study of Kickstarter.

Davis et al. (2017), carried research to determine whether there is a customers’ perception of a product and its crowdfunding. They drew their study on the effective events theory. The research concerned funders' perceptions, as well as the expectation alignment in products with their presenters. They tested their hypotheses relationships which were drawn from a sample which included 102 participants. The participants assessed ten different kinds of product pitches made which were made by ten different entrepreneurs. The results indicated that crowdfunding is positively related to product creativity, either direct or indirect. The indirect effect in contingent to the extent of funders’ perception on the entrepreneurs whether he/she is passionate or not, i.e., the perceived entrepreneurial, passionate upsurges positive nature for the indirect effect.

Zao et al. (2016) researched to find out the Determinants of backers’ funding intention in crowdfunding because the success of crowdfunding projects had become less than 50%. They considered that project components found in most platforms should attract visitors’ as well increasing achievement of goals for fundraising. Utilizing the social exchange theory for the intentions of funding which influenced backers, the study examined key factors. 204 backers were involved in the research. The204 backers were involved in the study. The results indicated to be a relationship between the fundraising intentions and the commitment.

However, how much the method is useful to businesses and projects, it has not gained popularity amongst individuals worldwide. The biggest challenge to this is that even people who are aware of it are not willing to learn how the term works. Most entrepreneurs do not appreciate it. In order for the crowding funding to grow, education is very vital. Particularly markets in the Middle East because the concept is novel compared to European and US markets.

Studies have been done worldwide to relate the success of crowdfunding projects and peoples’ awareness. The finding has been mixed up, indicating several factors which result in its success. However, these factors do not indicate if the success is directly attributable to the education of crowdfunding to people. The people fail to know crowdfunding well has resulted in many projects failing. It is in this line of the above arguments that this study, therefore, intends to establish and understand if education can make people get familiar with crowdfunding which can result in its growth. So the research question would be; is there a relationship between the success of crowdfunding and people’ familiarity with education?

Crowdfunding refers to as a process by which a project or a venture is funded by raising many little amounts of capital by a large group of people through the internet. Its platforms are websites which allow to set up an online fundraising campaign and receive money from individuals. It is a combination of crowdsourcing, a practice of engaging a group of people for a common goal especially innovation, and micro-financing. The entire act is made possible by three groups of people namely the project initiator, a person who gives out an idea about the project and how the money will be contributed, individuals or groups who second the initiator's idea and lastly a moderating organization that gathers the two parties to launch the concept. Undoubtedly, the crowding process has grown significantly in recent years helping individuals who have business ideas but lack capital to be funded. However, global business analysts still consider the process to be in its early stage of development because many people globally have not embraced the method of project funding.

1. Donation Crowdfunding

This type of crowdfunding is a way to fund money for a project by asking individuals or large numbers of generous donors online. Donations based crowdfunding usually run on a charity basis and not for profit. Donators see their rewards in the form of happiness because their money is being used for a great cause.

2. Reward-based crowdfunding

This is a type of crowdfunding where the individuals taking part in an initiated project contribute a certain agreed amount of money for a reward. Most of the time, the token is usually the commodity being produced. There are two leading platforms of overcrowding that are reward-based namely the Kickstarter and Indiegogo. It is believed that the reward based technique is more rewarding than the other categories for it focuses more on the act of only donating to come up with the money required to run the project. This implies that one does not have to seek funds from other sources for there is no fixed amount of money a backer is required to contribute sparing him from the risks that might be associated with taking bank loans.

3. Peer to peer lending

This is a category of crowdfunding entails the process whereby a peer to peer lending sites links borrowers with possible investors via the internet. The peer to peer lending sites ensures they have all the relevant details about a borrower to avoid circumstance of cons taking advantage. The lending services also act as an intermediary of the interest rates to be paid by a borrower. This method of raising capital to run an errand has benefits; for instance, an investor can get substantial returns of interest as compared to if he took his money in the bank.

4. Equity Crowdfunding

This type of crowdfunding is similar to peer-to-peer lending regarding an online platform. Individuals can invest in a business through the platform and gain equity stake. These businesses are early stage small start-ups with no other access to funding. Once the online platform completes the equity raising, then the crowd investors hold equity stakes in the firm. However, these businesses are riskier as an investment.

Success is a process of achieving set goals.

Many people are not familiar with crowdfunding, such that they need education about it.

However, how much the crowdfunding is useful to businesses and projects, it has not gained popularity amongst individuals worldwide. The biggest challenge to this is that even people who are aware of it are not willing to learn how the term works. Most entrepreneurs do not appreciate it. In order for the crowding funding to grow, education is very vital. Particularly markets in the Middle East because the concept is novel compared to European and US markets. This study is significant to the following groups of people: scholars, the government of different nations, policymakers, investors and the corporate bodies. There is a need for the general public to know and understand well what crowdfunding is before investing their funds to those projects being backed by the crowdfunding. Through the study, they will be able to understand it well. Investors will also understand the reason why some of their projects fail upon being initiated. For scholarly purposes, this study contributes to this discussion through finding the relationship between education of people and success of crowdfunding. Future researchers can use the findings of this study to further arguments on the knowledge of people vs. the crowdfunding growth or on other topics that find this study relevant.

Crowdfunding success on projects depends on various factors including people aware of what the crowdfunding what it is. Education plays a vital role in informing the public what it is and what intentions are projects are up to. Education for the above can be carried out through the Social Media as well as in school classes. Molick (2013), suggests that through personal networks as well as the underlying project quality results in the success of projects using crowdfunding efforts.

Notwithstanding, over a huge amount of money regarding billion dollars used by a vast number of individual crowdfunding sponsor an extensive scale activity by US Congress to empower crowdfunding as a wellspring of capital for new pursuits. Even essential education or scholastic information of the elements of crowdfunding is missing, outside of the still-unprecedented examination of specific crowdfunding endeavors Butticè, Colombo, & Wright, 2017). For instance, researchers know next to none about the flow of effective crowdfunding, and also the general appropriation and utilization of crowdfunding components. No information to show in the case of crowdfunding endeavors fortify or negate existing hypotheses about how ventures raise capital and make progress. There is additionally vulnerability about the long haul ramifications of crowdfunding, for example, in the case of existing activities eventually convey the items they guarantee. To put it plainly, this vital and developing region of entrepreneurial movement and government activity is understudied, even as both practice and strategy keep on rapidly progress. People should be educated all that is concerning the above.

There are various forms and benefits of crowdfunding which people should be educated to know more about them so that they can take advantage of them. They can be educated on the wide variety of benefits such as in a donation-based crowdfunding technique which can help one to get a Nobel price is where one comes up with the idea of raising money for a charitable cause. Examples are educating the girl child on ways to avoid getting pregnant before finishing school, conserving the energy, helping the orphans or the elderly in the society among others. The person can be shortlisted for the Nobel award because of his actions that purposes to make the world a better place. Donation based has an advantage of enabling one to raise money for his project that is non-profitable through internet sites, for example, Milaap. This makes it more cost-effective as compared to the traditional way of raising money for a charitable cause that required one to use television or radio stations to advertise (Davis et al., 2017). Moreover, the new method of raising fund for charity projects saves one the process of booking space for his advertisement on air.

Pirkle (2015), indicates that many people are not aware of the crowdfunding as a way of funding their projects. They have been constraining to growth by banks because they have only known them as sources of funds. However, these entrepreneurs are open to other options to fund their business such as crowdfunding. The author further indicates that there is little knowledge held by the public concerning the crowdfunding, and even those who know about it are not well informed of how it works. Pirkle further suggests that governments and other bodies should come up with ways of educating the people on the usefulness of crowdfunding. He indicates that crowdfunding can be used for various purposes to support charities. He further states that the traditional forms of banking are not viable since they cannot help acquire enough capitals.

For Eureeca, with the education of financial specialists (investors) and entrepreneurs about the crowdfunding – how it operates, why it's useful, how your venture can be arranged for a startup –essential challenge. Business people, for instance, are furnished with formats, go-to-showcase methodologies, and promoting playbooks. They likewise reach several classes and workshops for getting ready organizations for the stage. Financial specialists are additionally focused on such measures so as to influence the crowd investing in processing not so much befuddling but rather more engaging (Pirkle, 2015).

In conclusion, I would indicate that Crowdfunding can make it possible for large crowds of people to fund their innovative projects. The kind of funding can tap much wisdom of crowds who were previously not connected it. Countries, States, Nations and other groups should come with ways to educate the people on how to appreciate the crowdfunding which can improve finances of their projects. I would recommend the Success of projects initiated through crowdfunding can only be successful if all parties involved are well informed through education.

References

Butticè, V., Colombo, M. G., & Wright, M. (2017). Serial crowdfunding, social capital, and

project success. Entrepreneurship Theory and Practice, 41(2), 183-207.

Davis, B., Hmieleski, K., Webb, J., & Coombs, J. (2017). Funders’ positive affective reactions to

entrepreneurs’ crowdfunding pitches. The influence of perceived product creativity and

entrepreneurial passion. Journal of Business Venturing, 32 (1), 90-106.

Kuppuswamy, V., & Bayus, B. (2017). Does my contribution to your crowdfunding project