Understanding crowdfunding for business funding – a legal and platform review

Abstract

PurposeSignificant 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/approachThis 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.FindingsThis 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/implicationsThis research is limited by the relative newness of both the Jumpstart our Business Startups Act and the P2P CF sites.Practical implicationsAs 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/valueThere 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.