In Professor Seth Oranburg‘s forthcoming book Social Media Investing, he intends to “weave together ideas from various literature and present new theories in corporate finance, securities regulation, business associations, and entrepreneurship.” In anticipation of the book, Professor Seth Oranburg examined the impact of crowdfunding as an emerging financial model in a guest post on the GoodCrowd blog. Read an excerpt below:
Crowdfunding began as a way for independent musical artists to raise a few thousand dollars to rent a recording studio and release a record. It evolved distinct “rewards” and “donative” models. Rewards crowdfunding promotes consumer projects ranging from the niche (a casebook about zombie law) to the ubiquitous (the Pebble smartwatch). Donative crowdfunding promotes new charitable projects like micro-lending and cancer research. Public crowdfunding is a new model, where mature nonprofits are using portals to fund public goods by offering rewards and challenges.
Public crowdfunding is different from traditional charity fundraising in at least three important ways. First, public crowdfunding is an open call to action on the Internet to all people, not a targeted charity campaign to visitors or former donors. Second, public crowdfunding uses gamification principles like challenges and rewards to attract backers in real time. Third, public crowdfunding highlights and advertises a specific public-good product, instead of promoting a non-profit generally. These three factors, harnessing the power of the Internet, make public crowdfunding a powerful new tool to democratize charities.