The paper is revolving around the factors influencing the crowdfunding for the purpose of financing. The concept of crowdfunding is extracted from the crowdsourcing and microfinance. It refers to the financing through the platform of the internet to different investors. Every investor contributes a certain amount of the financial support to businesses while obtaining equity or physical products as a return.
Factors Influencing Crowdfunding for Organisations
It is noted that there are few studies discussing the factors influencing the crowdfunding for the organisations. The ones that exist focus on the social capital, geolocation, and goal of funding. The study of Ahlers, et al (2015) is based on the campaigns on the platform of Kickstarter to seek an answer for reasons for success rates of some campaigns. He performed logistic regression on more than 48,000 funding efforts to examine the social capital of entrepreneur through the use of log on different friends of Facebook. The study found the positive relationship between the size of the social network and the success of campaigns for crowdfunding. Another study of Damus (2014) can also be considered as the example in which he stated that there is a relationship between the geographical location and the rate of investments. It is because of reducing the investor risk in the traditional financing.
Bruton, et al (2015) also reflects that geography also has the influence on the crowdfunding even if it occurs at the online platform. The large social network has the positive relationship with the success of an investment in businesses. It is also observed from the study of Allison, et al (2015) that investments into the crowdfunding form provided answers to the ways through which the geolocation and the success of funding are found to be related with one another. It is notified that the location of the business is supposed to be cross-checked with different personal sites such as Facebook. It reflects that the crowdfunding enables the investments for long distance businesses. The proximity to the investors is considerably important for the organisations to receive the funds. Furthermore, the location can influence the actual success of the crowdfunding while having the characteristics making the organisation successful in terms of profitability.
The equity also influences the crowdfunding as observed in the study of Sørensen (2012). This study observed the factors influencing of different investors as well as the factors influencing the amount of funding. The smaller projects are found to be more likely to be financed. The concept of sharing economy can be established to provide that traditional institutions are losing power when the organisations obtain benefits from the associated organisations. In case anyone living in someone’s house or letting a person drive him to the airport, then there is no factor stopping them to fund the project of others. It can be said that there is no doubt about the crowdfunding being developed into the important option of financing for the organisations. Since the market has become established, the people have turned to avail the benefits of crowdfunding (Allison et al., 2015; Bruton et al., 2015; Ahlers et al., 2015; Verdonik, 2016).
It is evident that the success rates of the crowdfunding platforms along with the factors influencing it are not being researched significantly. It is found that the functions of the platforms for crowdfunding have been taken for granted as it is a tool providing the new development for organisations. Moreover, the outsourcing of labour to the third party is done by the organisations for decreasing the costs or enhancing the quality of the performance. It is also noted that the effect of human capital along with the experience of work on the success of crowdfunding. The organisations receive the investments from the broader group of investors for the success of crowdfunding (Moritz et al., 2015; Frydrych et al., 2014; Lehner, 2013; Damus, 2014).
It can be concluded from the above discussion that crowdfunding is based on the range of factors. The crowdfunding has been developed into the important method of financing with the growing factor affecting the campaigns of crowdfunding. The use of internet has the significant influence on the crowdfunding while innovating the available funds for the businesses.
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