Items tagged with crowdfunding:
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Faculty Affiliate, Ethan Mollick reflects on how crowdfunding can be used as an instrument to measure the demand for a start up. Ultimately this is important because when attempting to court big time investors, not only do start ups require a good idea, but they must also establish traction and a market for its services; both of which can be demonstrated through successful crowdfunding.
Indiegogo is an international crowdfunding website founded in 2008. Faculty Advisor Ethan Mollick summarizes the company’s growing business model as a platform that streamlined the process of large scale business expansion by connecting people with the tools and experts to facilitate this growth. Professor Mollick also notes how although U.S. law didn’t allow equity crowdfunding until 2015, the practice itself has yet to popularize.
Many owners of beloved local businesses, especially in pricier cities, have been forced to swallow their pride and appeal to their customers in times of crisis – a process streamlined by the rise of online crowdfunding platforms.
Crowdfunding campaigns frequently fall far short of their goals, research shows. Estimates of failure in the industry vary, but study after study reveals that more than half of campaigns fail – and those that fail, fail hard. A 2014 study by Faculty Affiliate Ethan Mollick of about 48,500 Kickstarter projects found that among the failed projects, the mean amount of funds raised was just north of 10 percent. Only 3 percent of the projects that failed to reach their goal made it to the halfway point.
Crowdfunding has expanded to being a great place to invest money or help new products come to market by pre-purchasing. The Crowdfunding market saw over 87 Billion dollars exchanged in the market in 2016. This market has attracted scammers whose only purpose is to rip off with good hearts.
Faculty Affiliate Ethan Mollick in 2015 found that 9% of projects on Kickstarter fail to deliver as promised to their backers, and this number does include fraudulent projects. Based on this, consumers should closely watch for scams.
Professor Ethan Mollick discusses the unpredictable and complex process of crowdfunding and the consulting companies that have sprung up to service it.
“Anyone who tells you they know is wrong. I cannot find any factors that predict virality and I’ve got all the data,” said the creator of the Wharton Crowdfunding Survey.