According to author Golić (2013), crowdfunding is when small or medium sized enterprises use social media to recruit funds for their businesses. It is easier for them to look for a lot of people who are willing to invest in their business, than looking for one or two investors. This is because many people investing smaller amounts of money is somehow easier than finding one investor who is willing to invest a large sum of money. Sometimes people invest in small businesses because they like the idea of the business, and other times they invest because they get something in return. The growth of the Internet and social media platforms have made it easier for small business to ask for money because they can use their platforms to ask for contributions. Golić (2013) provides a great explanation of how crowdfunding works, she explains that it consists of three actors, namely the business, the crowdfunder, and an intermediary. The business (or person) is the entity that is asking for contributions and the crowdfunder is the person who is willing to give some money. The intermediary is the form of communication that they use to communicate with each other. This is most often used through the Internet. People can either use crowdfunding websites, or their social media platforms. Golić (2013) gives the example of SellaBand, which is website where bands can upload their music and then people can donate money if they enjoy them, this helps startup bands get on their feet.
A really interesting article by Wells (2014) talks about what crowdfunding is being used for today. She tells different stories of people who have used crowdfunding websites to raise money for different reasons. What is striking is that it is no longer used solely by businesses that want to fund a project/idea/service. Now, on the other hand, individual people can use crowdfunding websites to pay for their personal things as well. For example, Vania Chan wanted to go to circus school but did not have the money to pay it, so she decided to ask people to fund it for her. Another scenario was a couple who did not have enough money to go on a honeymoon after their wedding, so they decided to ask their guests to help them raise $9,000 for their trip instead of giving them actual gifts. In this case many people still bought them physical gifts because they found the request very strange. A 55-year old woman who had just lost her job also made use of crowdfunding as she wanted to go on vacation to Italy. Thus, people nowadays use crowdfunding to pay for their own leisure items. In some cases they raise enough money, the 55-year old, for example, was able to go on her trip to Italy. The article is very interesting, but the comments show that there are many people who think this is wrong. One person even said that people should do things if they don’t have enough money for it.
What do you think? Do you think people are misusing crowdfunding? Do you think it should be kept to only funding actual products and ideas? Or is it normal that people ask for money for their personal use?
Golić, Z. (2013). Advantages of crowdfunding as an alternative source of financing of small and medium-sized enterprises. Proceedings of the Faculty of Economics of East Sarajevo, 8, 39-48. doi: 10.7251/ZREFIS1408039G
Wells, C. (2014, Oct 22). People Are Using Crowdfunding Sites to Pay for Overseas Travel, Classes. The Wall Street Journal. Retrieved from http://online.wsj.com/articles/people-are-using-crowdfunding-sites-to-pay-for-overseas-travel-classes-1413997556