Classroom Companion: Business

 
► Example 7.7 Kickstarter
Kickstarter is an example of a crowdfunding organization. Project owners publish and 
describe their project on the Kickstarter website. People from all over the world may 
choose to fund the projects they like, often with as little as $1. There may be thousands 
of different investors on a single project. The project will start if the project achieves 
its funding goals. Kickstarter projects can be anything from game developments and 
app design to the creation of books, music, art, and films. All projects awaiting funding 
are listed on their homepage. On Friday, January 10, 2020, there were 467,867 projects 
asking for funding on the Kickstarter website, 3630 of them were software projects. 
When a project is funded and the project owner has completed the project, the funders 
will receive a reward based on the allocated funding, e.g., a copy of the creative work. 
.
Figure 
7.4
illustrates the creative and funding process of Kickstarter.
Project owner
kickstarter.com
Project
Crowdfunders
Funds
Proposes
Register
Register
Ownership
Reward
Implementation
(if funded)
Creation
. Fig. 7.4 The creative and funding process of Kickstarter. (Authors’ own figure)
7.3 · Production Tools

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100
7
Kickstarter apply a 5% fee on the collected funding as a source of revenue. Crowdfunding 
has been particularly popular in the video game and traditional table-top game industry, 
and several games have been funded using the Kickstarter website.
◄
7.3.2 
 Peer-to-Peer Lending
Peer-to-peer lending (P2P lending or crowdlending) means that individuals lend 
money directly to other individuals or businesses. Startups may have problems 
financing the project by traditional bank loans because of the high risk associated 
with the project. In such cases, peer-to-peer lending is an alternative way of financ-
ing the project.
Companies mediating in peer-to-peer lending transactions run match-making 
platforms where borrowers and lenders may register for a certain fee. The interme-
diating company does not offer loans using its own money and is thus not a regular 
financial institution.
1
The company may, however, offer services such as credit 
checking, registering the transaction details, and assisting in resolving disputes. 
The intermediators are value networks as defined in 
7
Sect. 
8.3
, matching people 
or firms lacking capital to initiate a project and potential lenders.
The interest rates on peer-to-peer loans are generally lower than for bank loans 
but higher than the interest rates on bank deposits. Moreover, it has been reported 
that this market is less volatile than the stock market, and an investor targeting 
peer-to-peer lending will typically diversify the funds over many borrowers to 
reduce risks and increase the return on investments (Roth, 
2012
). People are then 
encouraged to invest money in peer-to-peer lending rather than in stock market 
securities. The Australian peer-to-peer lending company SocietyOne reports that 
they passed $800 million in lending by the end of 2019.
In some cases, the interest rates are very low and sometimes even zero, in par-
ticular, if the cause is charity or investments in projects in developing countries 
(Brook, 
2007
), for example, using the peer-to-peer platform of Kiva.
Peer-to-peer lending stands for about 73% of all crowdfunding for small- and 
medium-size businesses according to a report from the Emerge Partnership (ITU) 
(A review of Micro, Small and Medium Enterprises in the ICT Sector. Emerge