Crowdfunding has become an important topic for last years in startups and enterprises. The understanding of the concept has been mainly depicted from a practioner’s viewpoint. However, more and more authors have researched it in order to make it a managerial strategy option for business. The objective of this paper is to bring an overview of the literature and a general description of it.

2. Universidad Nacional de Colombia
Engineering Faculty
Industrial Engineering Master Program
GISTIC – Research Group on Systems and ICT in organizations
Author: Danny Sierra González
Email: dsierrag@unal.edu.co

3. 1. Introduction
2. Definitions: from crowdsourcing to crowdfunding
– Wisdom of crowds & collective intelligence
– Some examples along history
– Crowdfunding – stages
– Important aspect in crowdfunding
3. Typologies
– Actors
– Form of capital provision
– Crowdfunding enterprises
– Patterns of crowdfunding
4. Conclusion & outlook
5. References

4. Definitely crowdfunding is a
buzzword nowadays with the
booming of digital startups, web 2.0
revolution and the last years where people
more and more are getting used to the logic of
social media interaction on the internet.

5. The objective of this article is to have a deeper
understanding of what have been written
about crowdfunding as a
concept, its actors, typologies,
patterns and depict some well known
companies in the world and other that work
locally in the country.

6. Broader concept
Crowdsourcing(1/3):
describes a business model based on internet that
taps into the crowd to get creative ideas from a
distributed network of individuals by an open call to
benefit a single firm.
Source: Howe (2006), Seltzer & Mahmoundi
(2013), Brabham 2008

7. Broader concept
Crowdsourcing(2/3):
describe it as a strategic model that accelerate
efficiently for companies to produce new products
and solve problems using internet to interact with
people independently where they are in a new way.
Source: (Agrawal, Catalini, & Goldfarb, 2011).

8. Broader concept
Crowdsourcing(3/3):
The concept is based on the egalitarian principle,
“every individual possess some knowledge or talent
that some other individual will find valuable.”
Source: (Seltzer & Mahmoudi, 2013).

9. Wisdow of crowds:
‘‘. . . under the right circumstances, groups are
remarkably intelligent, and are often smarter than
the smartest people in them’’ (p. xiii)."
Source: (Surowiecki, 2005)

10. Collective intelligence:
“…It has become impossible to restrict knowledge
and its movement to castes of specialists . . . Our
living knowledge, skills, and abilities are in the
process of being recognized as the primary source of
all other wealth.
What then will our new communication tools be
used for? (p. 9)”.
Source: (Lévy & Bonomo, 1999) cited by
(Brabham, 2008)

11. Community as source of
knowledge:
An important aspect of crowdsourcing is that in a
problem-solving situation, a firm can benefit by
having a large number of individuals from different
cognitively perspectives offering their ideas, even if
those individuals are not deemed specialists
themselves.
Source: (Brabham, 2010)

12. Howe’s crowdsourcing
definition at Wired Magazine
(2006):
“Simply defined, crowdsourcing represents the act of
a company or institution taking a function once
performed by employees and outsourcing it to an
undefined (and generally large) network of people in
the form of an open call . . . The crucial prerequisite is
the use of the open call format and the large network
of potential laborers. (para. 5)”
Source: (Brabham, 2009)

13. Crowdfunding:
It is basically an open call instead of requesting
solutions or tasks, individuals bring a portion of
money to fulfill a specific purpose collectively.
Usually such open calls are via online with the
intention of encouraging individuals voluntarily
contribute and support the funding process.
Source: (Belleflamme, Lambert, & Schwienbacher,
2013; Kleemann, Voss, & Rieder, 2008).

14. Supporting statements about
Crowdfunding(1/2):
- There is frequently with the promise of future products or equity.
(Mollick, 2014)
- Financial resources are either in form of donation or in exchange
for some form of reward and/or voting rights in order to support
initiatives for specific purposes”. (Lambert & Schwienbacher, 2010;
Kleemann et al., 2008).
- One of the biggest barriers for a business it that cannot obtain
money easily from traditional venture capital institutions or banks
even in very sound projects, specially innovation projects. (Adams,
2014; Cosh, Cumming, & Hughes, 2009; Kuppswamy & Bayus,
2013).

15. Supporting statements about
Crowdfunding (2/2):
- Crowdfunding has become for some startups a new approach for
business development where the crowd becomes more and more
involved with the firm as consumers, investors or both.
(Belleflamme et al., 2013)
- Crowdfunding happens without any intermediation but a
technological web-based platform where entrepreneurs “tap the
crowd” by raising the money from individuals directly. (Lambert &
Schwienbacher, 2010)
- It stated that all forms of crowdfunding are basically on similar
principles; funders expect a successful outcome for a project and
for this reason invest in it. (Mollick, 2014)

16. Some examples along history
- Mozart and Beethoven (c.a 1780).
- Statue of Liberty in New York. (1875)
- Teletón in Colombia. (1980)
- President Obama’s election campaign. (2008)
- Internet to rural areas by buying satellites. (2010)
- …
Source:. (Hemer, 2011) cited in (Kuppswamy &
Bayus, 2013)

17. Source:(Hemer, 2011).
Actors

18. Source:(Hemer, 2011; Bardford, 2012; Belleflamme
et al., 2013).
Forms of capital provision
Donations
Sponsoring
Pre-selling
Lending
Equity
Crowd-

19. Source:(Hemer, 2011).
Forms of capital provision vs complexity

20. Crowdfunding
enterprises
- Prodigy Network
- IndieGOGO
- Kickstarter
- Little Big Money
- LaChévere
- Fundación Help
- Afluenta
- Donacción
- Idbooster
- Súmame
- Uonet
- idea.me
Source: http://www.crowdfundingalacolombiana.com/
(assessed 18/2/2015)

21. Patterns of crowdfunding
Based on the experience of crowdfunding platforms, projects often
do not meet the funding goals and fail big and only a few get the
goal successfully.
Data:
Failed projects
- The mean amount funded of failed projects is 10.3% of the goal.
Only 10% of projects that fail raise 30% of their goal, and only 3%
raise 50% of their goal.
Success Projects
- 25 % of projects are funded 3% or less over their goal, 50% are
10% over their goal and 1 project in 9 receives 200% of its goal.
Source:(Mollick, 2014)(Kuppswamy & Bayus,
2013), (Burtch, Ghose, & Wattal, 2012)

22. - The concept that demonstrates that changes logic of power not
only on business dynamics but people’s participation on new
ventures in a more democratic basis.
- Crowdfunding platforms can be a good way to not only have a
cheap display to the market but also luckily a first seed-capital
funding by peers.
- there is still a big need in understanding of crowdfunding in terms
of success of the model, backers need to feel convinced, motivated
and involved of the process in order to mitigate the failure.
- It is essential to know how policymakers are updating the financing
law in order to adopt widely crowdfunding.
- Support new projects and innovation in broader spectrum of areas
such as science and politics.

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