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Crowdfunding and crowdsourcing

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Last update : September 24, 2013

Crowdfunding is the application of the Crowdsourcing concept to the collection of funds through small contributions from many parties in order to finance a particular project or venture. Crowdsourcing is the practice of obtaining needed services, ideas, or content by soliciting contributions from a large group of people, and especially from an online community, rather than from traditional employees or suppliers.

The First AAAI Conference on Human Computation and Crowdsourcing will be held November 7-9, 2013 in Palm Springs, California, USA.

Crowdfunding is alternately called crowd financing, equity crowdfunding or crowd-sourced fundraising.

An early precursor of the crowdfunding business model was Praenumeration, a common business practice in the 18th century book trade in Germany.

Crowdfunding is not only used to fund a startup company (equity-based crowdfunding), but also to create artworks such as music, theater, dance, films, literature and technology.

Crowdfunding platforms bring together the project initiator and the crowd. They create the necessary organizational systems and conditions for resource integration among all the players to take place. There are over 450 crowdfunding platforms with fundamental differences in the services provided. A comparison of crowd funding services is available at Wikipedia.

Some examples of crowdfunding platforms are listed below :

Since soliciting investments from the general public is often illegal in most countries, unless the opportunity has been filed with an appropriate securities regulatory authority, traditional crowdfunding platforms treat funds as donations. In the U.S. the crowdfunding exemption movement has been successful in 2012 with the passage of the Jumpstart Our Business Startups Act or JOBS Act,  a law intended to encourage funding of small businesses by easing various securities regulations.

In the past capital for startup companies has mainly been provided by business angels (also known as angel investors), in exchange for convertible debt or ownership equity. An increasing number of angel investors organize themselves into angel groups or angel networks to share research and pool their investment capital, as well as to provide advice to their portfolio companies.

Some angel networks in Luxembourg and the Greater Region are listed hereafter :

  • Luxembourg Business Angel Network (LBAN)
  • Seed4Start
  • EBAN (pan-European representative for the early stage investor community)

Here are some links to selected crowdfunding projects :