Success Factors in Reward based and Equity based Crowdfunding in Finland

Platform 
Examples 
GoFundMe, 
CrowdRise 
Kickstarter, 
Indiegogo, 
Mesenaatti 
CrowdCube, 
Invesdor 
Seedrs, CrowdCube, 
EquityNet, Invesdor 
Table 2: Different crowdfunding models 

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Master’s Thesis 
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4.1.1. Donation Model 
The key distinction of donation crowdfunding is that funders do not expect direct re-
turn for their contribution (Mollick, 2014). In other words funders are philanthropists 
(Mollick, 2014; Belleflamme et al., 2015).
Originally it was assumed that donation-based funding was only viable for non-profit 
organizations (Glaeser & Shleifer, 2001). However, this view has changed and dona-
tion crowdfunding has become popular amongst for-profit entrepreneurs. Nowadays 
about 60% of crowdfunding projects are donation-based. However, this figure does 
not translate into how much capital is raised through donation crowdfunding. Dona-
tion-based crowdfunding amounts to only about 3,26 billion US dollars. And in 2012 
the average amount raised by projects was a mere 1400 US dollars. (Belleflamme et 
al., 2015) Although it must be noted that the popularity of the donation model does 
not extend to individual crowdfunding, in which no platforms are utilized for facilita-
tion. There only approximately 9% of projects are donation-based. (Belleflamme et 
al., 2013) 
Donation-based crowdfunding can be difficult to succeed in when the project creator 
is a for-profit entrepreneur. Legal regulation might forbid for-profit entrepreneurs 
from practicing crowdfunding (
Lasrado & Lugmayr, 2013) and the long history of 
non-profit projects might deter people away from funding a for-profit venture. How-
ever, people may fund a project if they expect to become future consumers. This is 
because by funding they may reap large community benefits and enable the entrepre-
neur to carry the project forward. The wish to support an entrepreneur and possibly 
become a customer of theirs makes donation crowdfunding suitable for small market 
with narrow customer bases, for example comic books. (
Belleflamme et al., 2014) If 
entrepreneurs working in a small market were to share profits or pre-sell products as 
part of their crowdfunding, they would lose a significant share of their future revenue. 
This makes donation-based funding the best alternative for them. 

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