But there is built-in risk aggregation in the crowdsourcing model. If you raise $100,000 from a single angel investor or VC, that investor is risking the full $100k; ten-thousand backers each contributing $10 don't have nearly the same risk exposure.
On top of that, the expected reward is likely different: a traditional investor is looking for a financial return, and analyses the project in terms of its ability to deliver that return. But the motivations of Kickstarter contributors come from their qualitative desire to see the project itself completed and to enjoy the product it generates. There's also the possibility of prestige and networking opportunities that can come along with being a top-tier contributor.
The crowdsourcing model appears to exist in a grey area between traditional investment, pre-ordering as a consumer, and charitable giving, and it's probably too early to know for sure what its limitations are. It's actually possible that funding new and risky projects will in some cases be easier via crowdsourcing.
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But there is built-in risk aggregation in the crowdsourcing model. If you raise $100,000 from a single angel investor or VC, that investor is risking the full $100k; ten-thousand backers each contributing $10 don't have nearly the same risk exposure.
On top of that, the expected reward is likely different: a traditional investor is looking for a financial return, and analyses the project in terms of its ability to deliver that return. But the motivations of Kickstarter contributors come from their qualitative desire to see the project itself completed and to enjoy the product it generates. There's also the possibility of prestige and networking opportunities that can come along with being a top-tier contributor.
The crowdsourcing model appears to exist in a grey area between traditional investment, pre-ordering as a consumer, and charitable giving, and it's probably too early to know for sure what its limitations are. It's actually possible that funding new and risky projects will in some cases be easier via crowdsourcing.