Gary Dushnitsky, Professor of Strategy and Entrepreneurship, shares the four common types of crowdfunding. This was first published in Business Strategy Review, Volume 24, Issue 4, 2013. Subscribe today to receive your quarterly copy delivered to your home or work place. http://bit.ly/BSR-subscribe

1. Gary Dushnitsky, London Business
School Term Chair Professor of
Strategy and Entrepreneurship on
the four common forms of
crowdfunding.
© Copyright 2014 London Business School

2. Crowdfunding has witnessed incredible momentum
over the last two and a half years. There are four main
sub-categories of crowdfunding, which are divided by
the nature of the return to the crowd investor.
THE FOUR SUB-CATEGORIES OF CROWDFUNDING
• Donation-based
• Rewards-based
• Equity-based
• Peer-to-peer lending.
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3. Donation-based
Contributions are given in the form of a donation. Donors are
motivated by social or intrinsic aims, and receive mostly intangible
benefits in return (ie no money, equity or perks).
■ Platforms of note: Razoo (razoo.com), which offers a dedicated
platform for causes; Kiva (kiva.org), which employs a hybrid model
of donations based on peer-to-peer lending; and DonorsChoose
(donorschoose.org), which focuses on US public schools.
■ Campaign of note: Barack Obama’s 2008 presidential campaign
was a landmark crowd-funding example.
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4. Rewards-based
Contributions are given in the form of pre-purchasing a product or
service. Backers are motivated by the rewards (perks) and by social
aims, and receive the reward or perk as payment.
■ Platforms of note: Kickstarter (kickstarter.com) and Indiegogo
(indiegogo. com) are the biggest platforms, with more than $1bn
raised by tens of thousands of entrepreneurs.
■ Campaigns of note: Pebble Watch (Kickstarter) and Ubuntu
Edge (Indiegogo).
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5. Equity-based
Contributions are given in the form of equity investment. Investors
are motivated by a combination of intrinsic, social, and financial
motivation, and receive financial return on investment over time, if
the business succeeds.
■ Platforms of note include:
• Seedrs (seedrs.com),
• CrowdCube (crowdcube.com) and
• AngelList (angel.co).
■ Campaign of note: CrowdCube’s self-run funding campaign.
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6. Peer-to-peer lending
Contributions are given in the form of a loan. Lenders are motivated
by a desire for reward and intrinsic aims, and receive repayment of
the loan with interest. Occasionally, if the lender is socially
motivated, the loan is repaid without interest.
■ Platforms of note include:
• Zopa (zopa. com),
• Lending Club (lendingclub.com) and
• Prosper (prosper.com).
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7. This was first published in
Business Strategy Review
Volume 24 Issue 4 2013
www.london.edu/bsr
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