Crowd-funding types (Equity-based, Donation-based, Reward-based, and Lending-Based), and other Crowd-Sourcing methods (voting, wisdom, and creation)

1. Crowd-Funding
Mohammad Albattikhi
Twitter: @MAlbattikhi

2. The History and Evolution of
Crowd-Funding

3. First there was
Outsourcing
• Strategy by which an organization contracts
out major functions to specialized and
efficient service providers

4. Value of Outsourcing
• Economy of Scale
• Economy of Scope
• Labor Cost
• Talent
• Reduce Risk and Uncertainty
• Focus on Core business

5. New concept:
Crowd-Sourcing
Crowdsourcing Outsourcing
Global Single Location Center
24/7 Set Work Hours
Flexible Work Force Rigid Work Force
Output Based Pricing Headcount Pricing
No Overhead Cost Fixed Cost

6. Types of Crowd-Sourcing
Crowd-Funding Crowd-Voting
Crowd-Wisdom Crowd-Creation
Crowd-Sourcing

7. Crowd-voting
• Averaging of diverse input from crowd
participants
• Benefits:
– Reduce individual errors
– Reinforce correct solutions
– Reliably assess public opinions and sentiments

8. Crowd-Wisdom
• Selecting or aggregating one or more solutions
to an intellectual challenge or problem from
crowd participants.
• Benefits:
– More significant breakthrough innovations
– Products and services that exhibit greater novelty
– Lower cost
– Reduced exposure to risk

9. Crowd-creation
• Creating, co-creating, or co-producing
products, services, or content by collaboration
among crowd participants (e.g. Building a
websites or designing logos)

10. Crowd-Funding
• Solicit financing from crowd participants in the
form of donations, pledges, pre-orders, or
investments.

11. Crowd-Funding is a
Multi-sided Platform
Seekers Crowd Participants
An entrepreneur or a
company with an idea,
project, business; etc.
for which money is
needed
Also called funders,
donors, backers, or
investors. They pay
money (a.k.a pledges)
towards the seeker’s
crowd-funding
campaign

12. Types of Crowd-funding
Reward-based
Donation-
based
Equity-based Lending-based
Crowd-funding

13. Donation-based
• Collect donations from people who expect
nothing in return other than the personal
satisfaction of helping others.

14. Lending-based
• Collect relatively small loans from do-gooders
looking to help someone in need of financing,
but these lenders expect their loans to be
repaid, usually with interest
• Lending-based crowd-funding is commonly
called micro-lending or micro-financing

15. Equity-based
• Crowd participants, usually called funders, pay
money towards a seeker’s crowd-funding
campaign in exchange for some equity stake in
the idea, project, business, etc.

16. Reward-based
• Funders pay money towards a seeker’s crowd-
funding campaign in exchange for some non-
equity rewards, such as t-shirts, prototypes of
the gadget the seeker want to make, or
products personalized for the funder.

17. Why Crowd-Funding is
Getting Popular?
• Obtain pre- or early-production access to
innovative products or services
• Provide support for social and humanitarian
causes they care about
• easily participate in early-stage investment of
startups, businesses, and entrepreneurs

18. Crowd-Funding Compound
Annual Growth Rate

19. Crowd-Funding is Not Easy
• Crowdfunding Requires Extensive Promotion
• Pressure to deliver results to a crowd
compared to a handful of venture capitalists,
angels, or loan officers.
• Uncharted Regulatory and Transparency
Issues

20. Crowd-Funding vs. Other resources
Crowd-funding is different from other funding
techniques, such as raising money from family,
friends, investors or venture capital firms. The
thing that makes it different is the essential
properties of the crowd-diversity and
independence of crowd participants. Online
crowd-funding platforms make it possible to
access and effectively engage such crowds.

21. Example of a Successful
Crowd-Funding Platform
Kickstarter.com has been used to raise over
$546 million from 3.7 million crowd participants
to fund more than 38,000 individual projects.
The platforms generates revenue from taking 5%
of every successful funding campaign.

22. Can you run a project or start a
company by using crowd-sourcing
from A-to-Z?

24. Crowd-Sourcing Platforms Organized by Crowd-Sourcing Category,
Sub-Category, and Core Business Activity

25. Mohammad Albattikhi
Twitter: @MAlbattikhi