The Crowdfunding : A revolution for innovation funding

The Crowdfunding :
A revolution for innovation funding
Betty Cabon - Chuanyao Chu - Kevin Levesque
Definition
Crowdfunding is the practice of funding a project by using small amounts of capital from a large number of individuals. Crowdfunding makes use of
many platforms on internet such as Kickstarter or Ulule and of networks of friends, family and colleagues to attract investors and get them involved in a
new business venture.
Examples
KissKissBankBank
Kickstarter
Prêt d’union
Background
Currently there is no defined legal framework for crowdfunding
and it is ruled by classical financial regulation. Fraudsters risk
up to three years in jail and a fine of 375,000 euros.
However, the year 2014 should be a turning point: New laws
aiming to define a clearer framework should be released in
March, 2014. It is all about finding a trade off between
protecting investors and easing the development of projects.
Lend
money
Give
money
Invest
money
Key figures
 Started around 5 years
ago in France
 Represents around € 80
million in France
 Maximum of
$ 37 million
Ulule
Social
 Synergy effect
 Implement your own ideas
 More implication in the
project
 New jobs created (website
management)
Economic
 Innovative funding channel
 No initial capital invested
 Risk of misusing the invested
money
Environmental
 Humanitarian projects
 Break the limits (No
lobbying)

 Starting point: Fraud or scandal
 Main reason: Blocking of information and money flow
 Reduction of crowdfunding (lack of confidence)

 Consequences of the financial crisis (loss of money)
 Attractive for small companies
 Development of crowdfunding (more confidence)
Conclusion :
Crowdfunding allows investors to set themselves their objectives and therefore gives them the impression of being part of the venture. Hence, this
funding channel could be a solution for innovation funding in the current financial crisis. However some risks still remain: investors could lose the money
invested and the project initiator would jeopardise crowdfunding’s reputation.
References :
1 Lejoux, C., Crowdfunding: les règles du jeu bientôt édictées, La Tribune, 9th january 2014.
4 Repères: Crowdfunding, Libération,15th November 2013.
2 Cario, E., Crowdfunding, le temps des moissons, Libération, 31st january 2014.
5 Guinot, D., Les différents visages du financement participatif, Le Figaro, 13th december 2013.
3 Star Citizen lève 37 millions de dollars en à peine plus d’un an par crowdfunding, La Tribune, 27th january 2014.
6 Mollick, E., The dynamics of crowdfunding : An exploratory study, Journal of Business Venturing, 13th August 2013