Success Factors in Reward based and Equity based Crowdfunding in Finland

Master’s Thesis 
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Small-scale funders are also less interested in financial returns. (Belleflamme et al., 
2015) This means many funders are likely to gravitate towards different reward-based 
funding projects, which in turn gives hope that a wider selection of projects are likely 
to attract funding. According to Belleflamme et al. (2015) this applies especially to 
artistic and creative ventures. 
4.1.3. Lending Model 
In the lending model funds are given as a loan, with expectation for some rate of re-
turn on the capital investment (Mollick, 2014). These returns can be a fixed rate of 
return on investment or a share of the potential future profits (Belleflamme et al., 
2014). 
Currently, the lending model dominates the crowdfunding market, accounting for ap-
proximately 68% of all funds being collected globally. In 2014 lending-based crowd-
funding amounted to 11,08 billion US dollars. (Belleflamme et al., 2015) 
The lending model does not suit all ventures, because it expects entrepreneurs to be 
able to pay back the obtained capital to the investors with interest. Thus, investment-
based is appropriate for high-risk, potentially high-rewards ventures. According to 
Belleflamme et al. (2014) the lending model is best suited for early-stage ventures due 
to their intrinsic uncertainty.
At the moment, there are heavy legal restrictions for invest-based crowdfunding in 
certain regions – most notably, Europe. The laws on investor protection are designed 
for incumbent investment settings, which exclude a large number of crowdfunders. 
Thus, efficient and transparent crowdfunding markets cannot arise in Europe. (
De 
Buysere et al., 2012)
4.1.4. Equity Model 
In equity-based crowdfunding, funders receive equity securities or similar considera-
tions as compensation for their contribution (Mollick, 2014; Belleflamme et al., 
2014). The expectation is that the funded business will increase in value, thus provid-
ing a profit for the initial investors. 

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