Success Factors in Reward based and Equity based Crowdfunding in Finland

 

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Master’s Thesis 
21 
4. Crowdfunding Models 
4.1. Crowdfunding Types 
How crowdfunding can be facilitated has evolved a great deal along the years. Initial-
ly, the majority of crowdfunding was donation-based (Belleflamme et al., 2015). This 
meant funders did not receive compensation for their contribution, but donated chari-
tably. Then compensatory crowdfunding arose and funders got more than goodwill for 
their input. In the beginning, the rewards were merchandize benefits, but more recent-
ly financial rewards have emerged through equity and loan based funding, also known 
as investment-based crowdfunding (
Manchanda and Muralidharan, 2014)
.
Research now distinguishes between these types of crowdfunding, referring to them 
as different “models” of crowdfunding. The key difference between different crowd-
funding models is the compensation that the funder gets from contributing to a pro-
ject. Currently, research identifies four main models of crowdfunding: the donation 
model, the reward-based model, the lending model and the equity model (Mollick, 
2014; Frydrych et al., 2014). Reward, lending and equity crowdfunding models fea-
ture monetary or non-monetary compensation, whereas the donation model does not 
require any compensation (Frydrych et al., 2014). Table 2 shows the main characteris-
tics of different crowdfunding models. 
Crowdfunding 
Model 
Donation 
Model 
Reward-based 
Model 
Lending Model 
Equity Model 
Type of 
Compensation 
No rewards for 
funders 
Tangible or 
intangible, non-
monetary 
rewards 
Interest on 
investment or 
share of profits 
Equity shares as 
rewards