Crowdfunding: A Different Approach to Investment

Purpose: This article examines the concept of crowdfunding. The term "Crowdfunding" combines "crowd" and "funding," illustrating the practice of sourcing funds from a collective group. It represents a form of grassroots microfinance where supporters voluntarily invest in projects, they find compelling. Design/Methodology/Approach: The study reviews literature from Scopus and Web of Science focusing on crowdfunding and proposes a model of crowdfinding based on a game structure to solve the entrepreneur problem. Findings: The research identifies three main types of crowdfunding, hedonistic, altruistic, and for-profit, along with the key participants, project initiators seeking funding, backers supporting specific projects, and crowdfunding platforms facilitating connections. Practical Implications: Crowdfunding enables investors to collectively support individuals and organizations, fostering a grassroots approach to financing projects. As highlighted by the European Crowdfunding Framework, the surge in crowdfunding over the last decade is attributed to the proliferation of web and mobile platforms. These platforms facilitate dialogue between entrepreneurs, businesses, and creatives, enabling them to generate ideas, raise capital, and gather feedback. Originality value: Crowdfunding serves as a critical funding source for approximately half a million European projects annually, which would otherwise struggle to secure financing. In 2013 alone, Europe raised approximately one billion euros through crowdfunding. With the advent of Web 2.0, crowdfunding is poised for exponential growth, projected to reach trillions by 2020, showcasing its potential to revolutionize traditional investment paradigms.