Advances in Crowdfunding: Research and Practice by Rotem Shneor, Liang Zhao, and Bjørn-Tore Flåten

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 Introduction: From Fundamentals 
to Advances in Crowdfunding Research 
and Practice
 Rotem Shneor, Liang Zhao, and Bjørn-Tore Flåten
 Crowdfunding is a method to obtain money from large audiences, where 
each individual provides a small amount, instead of raising large sums 
from a small group of sophisticated investors (Belleflamme et al. 2014). 
Such pooling of contributions from multiple backers (Short et al. 2017) 
is done via the Internet, and often without standard financial intermedi-
aries (Mollick 2014). This phenomenon finds its origin in the application 
of crowdsourcing principles to the practices of fundraising while creating 
new community-enabled financing channels (Schwienbacher and 
Larralde 2012) for a wide variety of projects including commercial, cul-
tural, humanitarian, social, political, environmental, and technological 
projects to name a few.
 What started initially as sporadic independent fundraising initiatives, 
has transferred into a proliferation of crowdfunding-dedicated platforms, 
which served as market makers bringing fundraisers and funders to inter-
act via a common trusted system. Indeed, research on the state of the 

global industry, based on data collected from over a thousand platforms, 
shows that in 2017 global alternative finance volumes (covering all 
crowdfunding models) reached USD 371 billion, growing by 42% from 
2016 volumes (Ziegler et al. 2019). Furthermore, when excluding the 
unique context of China, global volumes have grown by 28% from USD 
47 billion in 2016 to USD 60 billion in 2017, growing by a further 48% 
to USD 89 billion in 2018 (Ziegler et al. 2020).
 However, the term “crowdfunding” is an umbrella term reflecting a 
wide variety of fundraising models. At the most basic of levels, these 
models can be distinguished by their underlying logic either intermediat-
ing investments or non-investment financing. Thus far, research and 
practice have distinguished between four core models, including crowd- 
lending, equity, reward, and donation crowdfunding (Mollick 2014; 
Belleflamme et al. 2014). The first two capture the dominant investment 
types of models, and the latter the dominant non-investment types of 
models. Later in the book, we provide a detailed overview of crowdfund-
ing models in use, their characteristics and unique aspects.
 However, for introductory purposes one can highlight the four core 
models by building on the definitions provided by the Cambridge 
University Centre for Alternative Finance (hereafter “CCAF”) in its 
annual reports (e.g. Ziegler et al. 2019): (1) Crowd-lending is when indi-
vidual or institutional backers provide loans to borrowers while expecting 
the repayment of the principle and a set interest within a predefined 
timeframe. (2) Equity crowdfunding refers to backers buying an owner-
ship stake in an organization. (3) Reward crowdfunding means that back-
ers provide funding in exchange for non-monetary rewards, most 
frequently in the form of pre-purchased products or services. And, (4) 
donation crowdfunding is a provision of funding based on philanthropic 
or civic motivations without expectation of material rewards.
 In this chapter, we introduce the fundamental concepts and dynamics 
of crowdfunding, which will serve as a common understanding for the 
discussions in the remaining chapters of this book. Here we present the 
key stakeholders in crowdfunding engagements, as well as the crowd-
funding process and stages. This is followed by a brief introduction to 
each of the book’s chapters while highlighting their main insights and 
contributions.

Advances in Crowdfunding: Research and Practice by Rotem Shneor, Liang Zhao, and Bjørn-Tore Flåten