Understanding crowdfunding for business funding – a legal and platform review

Purpose - Significant research works explore the broadly used and successful rewards-based crowdfunding (CF) platforms, including the key motives for both creators and funders. This paper aims to examine whether the motives identified by previous researchers for rewards-based CF also apply to peer-to-peer (P2P) CF. Design/methodology/approach - This research includes a review of current laws, as well as a focus on participant motives to participate in P2P CF. It also looks at how these motives differ between P2P CF and rewards-based CF. The CF platforms were then analyzed by characteristic to identify the current qualities of P2P platforms. Findings - This research shows that though there are some common underlying motives, the differences will demand a new participant approach and a P2P CF platform that are notably different from those that support rewards-based CF. Research limitations/implications - This research is limited by the relative newness of both the Jumpstart our Business Startups Act and the P2P CF sites. Practical implications - As more P2P CF platforms are created, additional research on the ability to manage investors, create effective project plans and identify keys to successful projects will further the understanding. Originality/value - There is little research today, however, that connects the qualities of successful rewards-based CF to successful P2P CF platforms. In addition, regulations connected with P2P CF are not clearly defined and enforcement is not well understood.