Motivation of funders


There are three different motivations for people who want to participate in crowdfunding: social return,
material return and financial return.

Social Return
With social return, the funders are already satisfied when they see that a project can be realised, their motivation
is intrinsic. Funders do not want anything else in return. This kind of return is normally present with
donation-based crowdfunding and is used extensively by non-profit organisations.

Material Return
With material return, the funders get a product or service as a reward for their investment. The business
model that is used for this is pre-sales crowdfunding. An investor pays the project owner in advance. The
project owner can use the funds as working capital to create the product or service.

Sometimes a funder is satisfied with a return with a (much) lower economic value than the original investment.
This business model is called reward-based crowdfunding. The perceived value can be much higher
than the actual economic value, for example, entrance tickets for a concert as a reward for a high donation
or a personal meeting with the musicians when a funder gives an even higher donation. Examples are
numerous and not limited to any specific industry.

Sometimes material returns are also given to funders in loan and equity-based business models. Here the
funders get a product or service from the company they invested in, instead of an interest or dividend

Financial Return
If a funder likes a crowdfunding idea, but also wants some financial return, he can invest via loan or equity based
crowdfunding. Here the risk is usually diversified between financial and emotional motivations. The project owner can use loans or equity-based crowdfunding to collect investments against interest or dividend payments. In comparison, social lending offers the funder a 0% interest-rate on his loan.


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