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I want a good writer in the CV, and before I give him my order, I want to see some his CV work. I want the CV is too professional and modern.
But I want a short summary for each courses that I took.And the skills that I was doing in my experiences
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MyEducation
The Bachelor
The university is (Umm Al- Qura University)
The City is ( Makkah )
The Country is (Kingdom of Saudi Arabia)
The Master
California Lutheran University
Thousand Oaks , CA
Public Policy & Administration
This is the Transcript
My Experiences
Number 1
Number 2
The second function tasks
My evaluation from my manager, and it was every three months
From January 6, to March 2007 = 91%
From April to June 2007 = 93%
From July to September 2007 = 95%
From October to December 2007= 97%
From January to March 2008 =98%
From April to June 2008 = 99%
From July to September 2008 = 99%
From October to December 2008= 99%
From January to March 2009 =100%
From April to June 2009 = 100%
From July to September 2009 = 100%
From October to December 2009= 100%
From January to March 2010 =100%
ورقة1
of course
nternational Center for Strategic Management &
Organizational Development) &University of California Irvine Extension
This strategy was developed and used originally by Motorola in the year 1986. Motorola is a renowned multinational telecommunications company. By the year 2010, this strategy was being used by many industry sectors. It is a high-performance approach that is data-driven. In this article, various Six Sigma goals are discussed.
The Six Sigma strategy uses a number of quality management methods. Such methods include specific training used to create special infrastructures of certified individuals in the organization who are experts in these methods. These individuals are referred to as ‘belts’; yellow, green, black, or master black depending on their expertise. Such experts focus their attention on projects. This helps in getting things done in an organized, teamwork-based fashion and assures quality end products or services.
One of the major goals of this strategy is quality control. The enterprise reviews quality of all factors involved in production. It places emphasis on elements like job management, controls, performance and integrity criteria. It also puts into place well managed and defined processes, as well as identification records. The Six Sigma Process also places a large emphasis competence, skills, knowledge, qualifications and experience of personnel.
The aim is to identify, analyze and remove causes of errors and defects in the organization. By so doing, 6 Sigma delivers real improvements in terms of quality and revenue. As a result, the bottom line of the enterprise is affected positively.
Another goal of this strategy is total quality management. This management philosophy aims at improving quality of processes and products continuously. It assumes that the quality of processes and products is the responsibility of any and every person involved in the consumption and creation of the service or products offered by an enterprise. It capitalizes on the involvement of customers, suppliers, workforce and management in order to exceed or meet the expectations of customers.
The ultimate goal of Six Sigma lies in zero defects within the products or services offered by an organization. A sigma rating can be used to describe the maturity of manufacturing processes. This rating indicates the yield or percentage of products the particular process creates that are defect-free. Over 99.99 percent of the outputs are expected to be defect-free statistically when it comes to 6 Sigma, or more specifically, less than 3.4 defects per million opportunities. Defects are defined as any output that does not meet the specifications of customers. By having such high quality output, a process, and therefore, a company, can meet or exceed the requirements or specifications of its customers.
Another Six Sigma Goal includes reducing variability in business and manufacturing processes. This is done by ensuring that each project carried out by the organization follows defined steps in a sequence. This shrinks the process variations dramatically. It also sets financial targets that are quantified such as profit increase or cost reduction.
There are many other Six Sigma goals. The overall objective of this strategy is to expand a company’s top line performance. This enables that company to drive the growth of its bottom line. The data-driven approach of analyzing the root causes of defects helps to deliver real improvements to the bottom line of the enterprise. Evidenced by the success attributed to those enterprises that have used it, it is clear that the techniques and tools the Six Sigma system provides are effective.
Park Institute Excellence in
Education
Irvine, CA
The financial management has to take three important decision viz. (i) Investment decision i.e., where to invest fund and in what amount, (ii) Financing decision i.e., from where to raise funds and in what amount, and (iii) Dividend i.e., how much to pay dividend and how much to retain for future expansion. In order to make these decisions the management must have a clear understanding of the objective sought to be achieved. It is generally agreed that the financial objective of the firm should be maximization of owner’s economic welfare. There are two widely discussed approaches or criterion of maximizing owners’ welfare -(i) Profit maximization, and (ii) Wealth maximization. It should be noted here that objective is used in the sense of goal or goals or decision criterion for the three decisions involved.
Profit Maximization: Maximization of profits is very often considered as the mainobjective of a business enterprise. The shareholders, the owners of the business, invest their funds in the business with the hope of getting higher dividend on their investment. Moreover, the profitability of the business is an indicator of the sound health of the organisation, because, it safeguards the economic interests of various social groups which are directly or indirectly connected with the company e.g. shareholders, creditors and employees. All these parties must get reasonable return for their contributions and it is possible only when company earns higher profits or sufficient profits to discharge the obligations to them.
Wealth Maximization: The wealth maximization (also known as value maximization or Net Present Worth Maximization) is also universally accepted criterion for financial decision making. The value of an asset should be viewed in terms of benefits it can produce
the cost of capital investment.
Prof. Era Solomon has defined the concept of wealth maximization as follows- “The gross present worth of a course of action is equal to the capitalized value of the flow of future expected benefits, discounted (or as capitalized) at a rate which reflects their certainty or uncertainty. Wealth or net amount of capital investment required to achieve the benefits being discussed. Any financial action which creates wealth or which has a net present worth above zero is a desirable one and should be undertaken. Any financial action which does not meet this test should be rejected. If two or more desirable courses of action are mutually exclusive (i.e., if only one can be undertaken) then the decision should be to do that which creates most wealth or shows the greatest amount of net present worth. In short, the operating objective for financial management is to maximize wealth or net present worth. Thus, the concept of wealth maximization is based on cash flows (inflows and outflows) generated by the decision. If inflows are greater than outflows, the decision is good because it maximizes the wealth of the owners.
Irvine, CA
Identifying actionable goals can be difficult if you don’t know what you want to achieve and if you don’t have a process in place. As engineers, we know that every successful project has a clearly defined project statement, scope, and process to deliver the intended results. The skills of project management, which we’ve developed delivering projects, can also be applied to defining and delivering our most important goals.
Project management uses an easy five-step process to guide projects from concept through final delivery. This process is successful in delivering projects in the work place and you canuse it in delivering your projects as well. Applying the principals of project management, you can define and deliver your most important goals. The process includes these steps:
Initiating. You initiate by defining your goal statement. Your goal statement includes all major deliverables, assumptions, objectives, constraints, stakeholders, and end date. Just like projects, the goal you’re aiming at may have more than one phase, so identify these and any major milestones as well.
Planning. With the goal statement in mind, turn to planning the resources, the duration, how to overcome constraints, who you’ll need to work with, what alternatives do you need to consider and plan for, what risks are involved, and how each deliverable will be created. The planning may be specific if you know all of the possible parameters involved, or can be elaborated as more information becomes available.
Executing. This step is simple: take action. Begin immediately executing your plan.
Monitoring & Controlling. In projects we use quality control and assurance to ensure the project work is proceeding as planned. Measures of time, cost, and scope are typically used to identify if a project is on plan or not. Depending on the complexity or your goals, you may be concerned about these same quantitative parameters. Or you may be more interested in the qualitative factors associated with achieving your goals, such as the satisfaction that comes from working towards achieving what’s most important to you.
Closing. Success isn’t achieved until the project is complete, whether in the work place or in our own lives. Your goal statement included deliverables, objectives and an end date. Closing out your goal requires that you meet these three elements.
Project Management and Goal Setting
Identifying actionable goals can be difficult if you don’t know what you want to achieve and if you don’t have a process in place. As engineers, we know that every successful project has a clearly defined project statement, scope, and process to deliver the intended results. The skills of project management, which we’ve developed delivering projects, can also be applied to defining and delivering our most important goals.
Project management uses an easy five-step process to guide projects from concept through final delivery. This process is successful in delivering projects in the work place and you canuse it in delivering your projects as well. Applying the principals of project management, you can define and deliver your most important goals. The process includes these steps:
Initiating. You initiate by defining your goal statement. Your goal statement includes all major deliverables, assumptions, objectives, constraints, stakeholders, and end date. Just like projects, the goal you’re aiming at may have more than one phase, so identify these and any major milestones as well.
Planning. With the goal statement in mind, turn to planning the resources, the duration, how to overcome constraints, who you’ll need to work with, what alternatives do you need to consider and plan for, what risks are involved, and how each deliverable will be created. The planning may be specific if you know all of the possible parameters involved, or can be elaborated as more information becomes available.
Executing. This step is simple: take action. Begin immediately executing your plan.
Monitoring & Controlling. In projects we use quality control and assurance to ensure the project work is proceeding as planned. Measures of time, cost, and scope are typically used to identify if a project is on plan or not. Depending on the complexity or your goals, you may be concerned about these same quantitative parameters. Or you may be more interested in the qualitative factors associated with achieving your goals, such as the satisfaction that comes from working towards achieving what’s most important to you.
Closing. Success isn’t achieved until the project is complete, whether in the work place or in our own lives. Your goal statement included deliverables, objectives and an end date. Closing out your goal requires that you meet these three elements.
Development Cost
So Much?
Easier & Housing Issues
Forum
Assisting the Homeless, took on the
Leadership Summit
Services Concordia
University Irvine
Irvine, CA
Learn to implement and sustain change in my organization.
.
– and staying out
Chapman University Orange, CA
Workshop
long beach
university
Bootcamp Workshop
to Attract New Customers
What’s going on?
Social Media Bootcamp
Irvine, CA
that will accelerate
for social media but great marketing tips as well. Julian Reyes,
ALUMNI
PROJECT
Recent Developments
in Capital Raising
Alliance
http://books.google.com/books?hl=ar&lr=&id=hdLc_yaPz5YC&oi=fnd&pg=PP2&dq=goals+of++Capital+Raising&ots=pd1aAJPRcJ&sig=2w4u1S5_EOeN6qxTcNyFn80j6LQ
#v=onepage&q=goals%20of%20%20Capital%20Raising&f=false
and Teambuilding
Compumaster. HRC
Professional business
training since 1989
2-Dec-13
http://www.aspira.org/files/documents/entrepreneurship/session_07
http://www.wipo.int/export/sites/www/freepublications/en/intproperty/itc_p159/wipo_pub_itc_p159
http://blog.kissmetrics.com/a-total-steal/
http://www.act-on.com/resources/whitepapers/6-best-practices-for-creating-a-content-marketing-strategy
http://www.vendasta.com/reputation-monitoring/review-monitoring
http://books.google.com/books?hl=ar&lr=&id=hdLc_yaPz5YC&oi=fnd&pg=PP2&dq=goals+of++Capital+Raising&ots=pd1aAJPRcJ&sig=2w4u1S5_EOeN6qxTcNyFn80j6LQ
Lipstick on a Pig? 10 Ways to Improve Your “Executive Presence”
http://cgi.money.cnn.com/tools/savingscalc/savingscalc.html
http://technori.com/2013/01/3070-7-step-startup-marketing-plan/
ورقة2
ورقة3
My skills
Communication = Excellent
Teamwork = Excellent
Initiative = Excellent
Problem solving = Excellent
Flexibility = Excellent
Computer skills = Very good
Technical skills = Very good
-English = good ( writing- reading- speaking)
-Arabic = Excellent ( writing- reading- speaking)
Availabeat:
http://hdl.handle.net/
2
0
7
8
.1/78
9
7
1
[Downloaded
20
1
3
/
11
/0
4
at 03:
32
:
23
]
Document de travail (Working Paper)
“Crowdfunding: tapping the right crowd”
Belleflamme, Paul ; Lambert, Thomas ; Schwienbacher, Armin
Abstract
The basic idea of crowdfunding is to raise external finance from a large audience
(the “crowd”), where each individual provides a very small amount, instead
of soliciting a small group of sophisticated investors. The paper develops a
model that associates crowdfunding with pre-ordering and price discrimination
,
and studies the conditions under which crowdfunding is preferred to traditional
forms of external funding. Compared to traditional funding, crowdfunding has the
advantage of offering an enhanced experience to some consumers and, thereby,
of allowing the entrepreneur to practice menu pricing and extract a larger share
of the consumer surplus; the disadvantage is that the entrepreneur is constrained
in his/her choice of prices by the amount of capital that he/she needs to raise:
the larger this amount, the more prices have to be twisted so as to attract a large
number of “crowdfunders” who pre-order, and the less profitable the menu pricing
scheme
.
Référence bibliographique
Belleflamme, Paul ; Lambert, Thomas ; Schwienbacher, Armin. Crowdfunding: tapping the right
crowd. CORE Discussion Paper; 2011/32. (2011).
http://hdl.handle.net/2078.1/78971
2011/32
■
Crowdfunding: tapping the right crowd
Paul Belleflamme, Thomas Lambert
and Armin Schwienbacher
Center for Operations Research
and Econometrics
Voie du Roman Pays,
34
B-
13
48 Louvain-la-Neuve
Belgium
http://www.uclouvain.be/core
D I S C U S S I O N P A P E R
CORE DISCUSSION PAPER
2011/32
Crowdfunding: tapping the right crowd
Paul BELLEFLAMME 1, Thomas LAMBERT2
and Armin SCHWIENBACHER 3
June 2011
Abstract
The basic idea of crowdfunding is to raise external finance from a large audience (the “crowd”), where each
individual provides a very small amount, instead of soliciting a small group of sophisticated investors. The paper
develops a model that associates crowdfunding with pre-ordering and price discrimination, and studies the
conditions under which crowdfunding is preferred to traditional forms of external funding. Compared to
traditional funding, crowdfunding has the advantage of offering an enhanced experience to some consumers and,
thereby, of allowing the entrepreneur to practice menu pricing and extract a larger share of the consumer surplus;
the disadvantage is that the entrepreneur is constrained in his/her choice of prices by the amount of capital that
he/she needs to raise: the larger this amount, the more prices have to be twisted so as to attract a large number of
“crowdfunders” who pre-order, and the less profitable the menu pricing scheme.
Keywords: crowdfunding, pre-ordering, menu pricing.
JEL Classification: G32, L11, L13, L1
5
, L
21
, L
31
1 Université catholique de Louvain, CORE and Louvain School of Management, B-1348 Louvain-la-Neuve, Belgium.
E-mail: paul.belleflamme@uclouvain.be. Other affiliation: CESifo. This author is also member of ECORE, the associatio
n
between CORE and ECARES.
2 Université catholique de Louvain, Louvain School of Management, B-1348 Louvain-la-Neuve, Belgium.
E-mail: thomas.lambert@uclouvain.be.
3 Université Lille Nord de France – SKEMA Business School (Université Lille 2, Faculté de Finance, Banque et Comptabilité,
F-59020 Lille Cedex, France. E-mail: armin.schwienbacher@skema.edu. Other affiliation as research fellow: University of
Amsterdam Business School.
The authors are grateful to seminar and conference participants in Antwerp, Bologna, Copenhagen, Groningen, Lille, Louvain-
la-Neuve, Montpellier, Paris, Prague, and Porto for their helpful comments on a previous version.
This paper presents research results of the Belgian Program on Interuniversity Poles of Attraction initiated by the Belgian State,
Prime Minister’s Office, Science Policy Programming. The scientific responsibility is assumed by the authors.
1 Introduction
It is well recognized that new ventures face difficulties in attracting external
finance at their very initial stage, be it through bank loans or equity capital
(see, e.g., Berger and Udell,
19
95, Cassar, 2004, and Cosh et al., 2009).
While business angels and venture capital funds fill gaps for larger amounts,
the smallest amounts are provided by entrepreneurs themselves and friend
s
& family. Still, many ventures remain unfunded, partially because of a
lack of sufficient value that can be pledged to investors, partially because
of unsuccessful attempts to convince investors (Hellmann, 2007; Casamatta
and Haritchabalet, 20
10
). To circumvent these problems, creative founders
have recently made use of a new source of finance–so-called crowdfunding–by
tapping the “crowd” instead of specialized investors.
The concept of crowdfunding finds its root in the broader concept of
crowdsourcing, which refers to using the crowd to obtain ideas, feedback
and solutions in order to develop corporate activities (Howe, 2008; Klee-
mann et al., 2008). In the case of crowdfunding, the objective is to collect
money for investment; this is generally done by using social networks, in
particular through the Internet (Twitter, Facebook, LinkedIn and different
other specialized blogs). In other words, instead of raising the money from
a very small group of sophisticated investors, the idea of crowdfunding is to
obtain it from a large audience (the “crowd”), where each individual will pro-
vide a very small amount. This can take the form of equity purchase, loan,
donation or pre-ordering of the product to be produced. The amounts that
have been targeted through crowdfunding have continuously increased
, with
Trampoline Systems targeting more than £1 million for the financing of the
commercialization stage of their new software. Recently, TikTok+LunaTik
raised $941,7
18
from 13,5
12
individuals in the form of product pre-ordering
of its multi-touch watch kit.
In this paper, we develop a model that associates crowdfunding with pre-
ordering and price discrimination, and we study the conditions under which
crowdfunding is preferred to traditional forms of external funding (bank
loan or equity investor). In this framework, the funding is needed to
finance
up-front fixed costs of production. Since the remaining consumers will pay
a different price, crowdfunding that takes the form of pre-ordering gives the
opportunity to price discriminate between the first group (those who pre-
order and thus constitute the investing crowd) and the second group (the
2
other consumers who wait that production takes place before purchasing
directly). However, an entrepreneur is generally unable to identify these
consumers. The entrepreneur must then use some self-selecting device so
as to induce high-paying consumers to reveal themselves. In this sense,
crowdfunding appears as a form of menu pricing.
The trade-off we explore in the model is thus the following: compared to
traditional funding, crowdfunding has the advantage of offering an enhanced
experience to some consumers and, thereby, of allowing the entrepreneur to
practice second-degree price discrimination and extract a larger share of the
consumer surplus; the disadvantage is that the entrepreneur is constrained
in his/her choice of prices by the amount of capital that he/she needs to
raise initially to fund production: the larger this amount, the more prices
have to be twisted so as to attract a large number of “crowdfunders”, and
the less profitable the menu pricing scheme.
The model highlights the importance of community-based experience
for crowdfunding to be a viable alternative to traditional funding. If the
entrepreneur is not able to create such benefits, no consumer will find it
worthwhile to pre-order the good, unless a discount is offered. However,
crowdfunding then becomes less profitable compared to traditional funding.
Also, the analysis shows that crowdfunding is the most profitable option only
for lower levels of finance. Indeed, crowdfunding yields higher profits only
for small amounts where the entrepreneur faces no (or limited) constraints in
his/her price setting between the two types of consumers while still securing
enough up-front financing. As the amount required becomes larger, the
entrepreneur is forced to distort more the prices so that more consumers
are willing to pre-order and thus the entrepreneur can collect up-front more
money. This in turn reduces the gains from price discrimination. Our results
are robust to the possibility that the entrepreneur may take the money
collected from the crowdfunding initiative and run away with it.
Another important result is that crowdfunders eventually pay more than
other, regular consumers. This outcome is consistent with findings from
different case studies where community benefits are important. Indeed, our
model shows that through price-discrimination, individuals with the highest
willingness-to-pay become crowdfunders. As they are willing to pay the
most and additionally enjoy non-monetary community benefits, it turns out
that they end up paying more than consumers waiting for the product to
3
reach the market.
The remaining of this paper is structured as follows. The next section
offers a definition of crowdfunding, discusses crowdfunding practices and
provides a survey of related literature. Section 3 presents the theoretical
model and discusses its results and implications. Finally, Section 4 concludes
with suggested topics for future research.1
2 Crowdfunding as a distinct form of entrepreneurial
finance
Our objective in this section is twofold. First, we aim at providing a general
definition of crowdfunding. Second, we discuss how crowdfunding differs
from other sources of entrepreneurial finance. To this end, we present se-
lected crowdfunding initiatives and then provide a review of the related
literature.
2.1 A definition
As mentioned, the concept of crowdfunding can be seen as part of the
broader concept of crowdsourcing, which refers to using the “crowd” to
obtain ideas, feedback and solutions in order to develop corporate activi-
ties. The term “crowdsourcing” has been first used by Jeff Howe and Mark
Robinson in the June 200
6
issue of Wired Magazine, an American magazine
for high technology (Howe, 2008). Kleemann et al. (2008) point out that
“crowdsourcing takes place when a profit oriented firm outsources specific
tasks essential for the making or sale of its product to the general public
(the crowd) in the form of an open call over the internet, with the intention
of animating individuals to make a [voluntary] contribution to the firm’s
production process for free or for significantly less than that contribution
is worth to the firm.” Although this definition of crowdsourcing is a useful
starting point, several caveats and clarifications need to be made in order
to transpose it to crowdfunding.
Raising funds by tapping a general public (the crowd) is the most impor-
tant element of crowdfunding. This means that consumers can volunteer to
1Section 5 is an appendix containing the details of the mathematical developments and
the proofs of the propositions.
4
provide input to the development of the product, in this case in form of fi-
nancial help. How the interaction with the crowd takes place may, however,
differ from crowdsourcing. For instance, platforms have recently emerged
to facilitate the interaction between entrepreneurial initiatives and poten-
tial crowdfunders. Entrepreneurs can post their project on the platform
and benefit from the platform’s visibility to reach potential investors. A
platform of this sort, Kickstarter, has successfully intermediated more than
7,000 projects already.2
Yet, while the use of the Internet to make an “open call” may be very
efficient for crowdsourcing in general, it can become more problematic for
crowdfunding, especially if it involves the offering of equity to the crowd.
Indeed, making a general solicitation for equity offering is limited to publicly
listed equity. In many countries, there is also a limit as to how many private
investors a company can have (see Larralde and Schwienbacher, 2010, for
an extended discussion). This creates important legal limitations to crowd-
funding initiatives, given that the input of the crowd is capital and not an
idea or time. Therefore, most initiatives do not offer shares but provide
other types of rewards such as a product or membership.
Besides, while the Web 2.0 has been a critical ingredient in the devel-
opment of crowdfunding practices, it also differs from open-source practices
(Brabham, 2008; Fershtman and Gandal, 2011). An important distinction
is that in the case of open-source, the resource belongs to the community,
which can then exploit it on an individual basis (there is no restriction on
who can use it); in the case of crowdfunding (and also crowdsourcing), it
ultimately belongs to the firm, which will be the only one to use it. This
distinction with open-source practices becomes even more obvious when re-
lated to crowdfunding, since capital cannot be shared. Unlike an idea or
a software code, capital is not a public good in the economic sense that
assumes non-rivalness and non-excludability.
Based on this discussion and in the spirit of Kleemann et al. (2008), we
offer the following, refined definition:
Definition 1 Crowdfunding involves an open call, mostly through the In-
ternet, for the provision of financial resources either in form of donation or
2These platforms share some similarities with online lending markets (Everett, 2008;
Freedman and Jin, 2010); while the latter more prominently target social entrepreneurship,
crowdfunding platforms have a broader scope of entrepreneurial initiatives.
5
in exchange for the future product or some form of reward and/or voting
rights.
As mentioned above, the promised reward can be monetary or non-
monetary (such as recognition). This definition encompasses many forms of
crowdfunding practices and has been discussed as such. However, in this pa-
per, we focus on crowdfunding initiatives that take the form of pre-ordering
of products. The following sections are restricted to the latter form.
2.2 Examples
Different reasons may explain recent successes of entrepreneurs who have
relied on crowdfunding. Also, there exist many ways to “crowdfund” a
project. However, crowdfunding initiatives share some common character-
istics, which we stress below in the light of selected cases.
In 2005, the South African singer Verity Price launched the “Lucky
Packet Project”. To record her album without assistance of a record label,
Verity Price needed to advance an up-front investment of ZAR400,000.3 To
this end, she set up a website where she asked people to pre-purchase her
album at ZAR200 before she recorded it. In return from their contributions,
people were compensated with some form of non-monetary rewards, such as
their name credited on her website, the possibility to vote on which songs
are recorded, and what artwork and photography are used. Also, 10% of
sales would be transferred to charities. Verity Price managed to reach the
threshold of ZAR400,000 with the contributions of 2061 individuals. Then,
she used the money to record her album. Now, the album has been put on
the market and is sold to everyone at ZAR100.
In the same vein, the LINCH three Project aims at making a documen-
tary film about the artist David Lynch. The filmmakers ask to David Lynch’s
fans to donate $50 each to fund the film project. The fans’ community are
rewarded by having online access to exclusive content on the filmmaking
process and by receiving limited edition of footage created by Lynch himself
either into print, T-shirt, or bag. Once the money is raised, the documentary
film will be produced and distributed via the regular distribution channels.4
3ZAR (South African Rands) 400,000 is approximately e
35
,000.
4Buyacredit.com’s initiative or the film “The Age of Stupid ” are other examples of
independent films for which financing is crowdfunded.
6
As exemplified by these two cases, crowdfunding seems more successful
in the entertainment industry. However, entrepreneurial ventures in other
industries have been financed in the same way and share similar characteris-
tics. Initiatives have been undertaken in other industries such as journalism
(Spot.Us ), beer (BeerBankroll ), software (Blender Foundation, Trampoline
Systems ) and tourism (MediaNoMad ). For instance, by investing in the
launch of the Lebanese restaurant mybar, people may enjoy financial and
social benefits, such as voting rights, special privileges at mybar, and annual
dividends. Also, members of MyFootballClub (who own the football club
Ebbsfleet United in United Kingdom) are completely involved in the man-
agement of the club through their voting right. The contribution of fans (a
membership fee of £35) allowed them to complete the takeover of the club
and form a community with real decision power.
To sum up, these cases highlight three recurrent characteristics. First,
crowdfunding initiatives often rely on advance purchase of a product, which
is not yet on the market in its finished form. At the pre-ordering stage, the
entrepreneur offers just a description and promise on what the final prod-
uct will be, and also commits that the product will indeed be put on the
market. Second, in most of the cases, consumers who pre-order the product
pay more than the regular consumers, who wait that production takes place
before purchasing directly. In the Verity Price’s experience, the regular con-
sumers pay ZAR100 whereas the pre-ordering consumers pay ZAR200. The
crowdfunders are therefore willing to pay more for the product. Third, the
crowd must identify themselves as such. Crowdfunders must feel that they
are being part of a community of privileged consumers. This community can
take many forms, starting with receiving rewards up to direct involvement
in the project. In the case of LINCH three Project, they gain access to ex-
clusive footage of David Lynch. Hence, consumers may self-select into this
community and entrepreneurs ensure that consumers enjoy such community
benefits and trust in the project.
2.3 Related literature
As crowdfunding is a relatively new phenomenon, it is no surprise that the
literature specifically devoted to crowdfunding is only nascent. It is however
worthwhile making parallels with other sources of entrepreneurial finance.
This allows us to better understand the specificities of crowdfunding as a
7
distinct form of finance.
First, looking at crowdfunding from a pure financial perspective, connec-
tions can be made with bootstrap finance. This form of financing consists
of using internal financing ways rather than traditional sources of external
finance (e.g., bank loan, angel capital and venture capital). Several studies
provide evidence of the different forms of internal sources used by boot-
strapping entrepreneurs (see Bhidé, 1992, Winborg and Landstrom, 2001,
and Ebben and Johnson, 2006, just to cite a few). Bhidé (1992) shows that
even among the Inc. 500 companies in the US, most of them started by
bootstrapping the company. Further financing methods for startups com-
panies are analyzed, for instance, by Cosh et al. (2009), who examine a
broader range of financing alternatives. None of these studies however con-
sider the “crowd” as possible alternative (regardless of whether it constitutes
potential consumers or simply profit-driven individuals).
A few studies have recently focused on crowdfunding more specifically.
One is by Agrawal, Catalini and Goldfarb (2011) that examines the geo-
graphic origin of consumers who invest on the SellaBand platform.5 The
authors observe that “the average distance between artist-entrepreneurs and
investors is about 3,000 miles, suggesting a reduced role for spatial proxim-
ity.” However, they establish that distance still plays a role insofar as “local
investors are more likely than distant ones to invest in the very early stages
of a single round of financing and appear less responsive to decisions by
other investors.”
The idea that investors may be responsive to other investors’ decisions is
also present in Ward and Ramachandran (2010). The goal of this paper is to
estimate the extent to which demand for crowdfunding projects is driven by
peer effects. Like in our model, it is assumed that consumption cannot hap-
pen until projects successfully complete their funding. What differs is the
5SellaBand is an online platform based in Amsterdam that enables musicians to raise
money to produce their album. SellaBand ’s business model is as follows. Artists can post
a number of songs (demos) on the platform; visitors to the site can then listen to the
music for free and choose the artists they want to invest in; artists seek to raise $50,000 by
selling “Parts” at $10 each; during the fundraising stage, money is held in an escrow until
the threshold of $50,000 is reached. The $50,000 will be used to fund the artist’s recording
project; finally investors (the “Believers”) are compensated by receiving 10% of revenue
from the album. SellaBand has been one of the first website of this kind; followers are,
e;g., MyMajorCompany in France, Akamusic in Belgium, and ArtistShare in the United
States.
8
link that the authors make between crowdfunding and information. While
we assume that crowdfunding allows the firm to gain information about its
consumers, they posit that crowdfunding allows consumers to refine their
information about the quality of an experience good. In their model, crowd-
funders may update their prior based on information from their investor
social network. Analyzing also data from SellaBand, they find that crowd-
funders are influenced by the success or failure of related projects and use
the actions of other crowdfunders as a source of information in their funding
decisions.
Finally, when crowdfunding is associated with pre-ordering and price
discrimination, some strand of literature in the realm of industrial orga-
nization provides useful insight. Nocke et al. (2011) have recently linked
product pre-ordering to price discrimination, however in a context of infor-
mation asymmetry.6 There, the true quality of the product is revealed later
so that the firm faces consumers with different expected valuations for its
forthcoming product. This induces consumers with highest expected valua-
tion to pre-order before the quality is known. Advance-purchase then leads
to price discounts, in contrast to our setting that abstracts from information
asymmetry. Also, their setting does not induce any network effect like in
our setting.
Such network effects and similar coordination issues among consumers
are present in another strand of literature that can be related to our work,
namely the literature on threshold (or discrete) public goods. These goods
can be provided only after a sufficient amount of contributions is reached so
as to cover their cost of provision (think, e.g., of a lighthouse or a bridge).
The parallel with crowdfunding is clear as the entrepreneur also needs to
collect private contributions before producing her good (which is private
rather than public in the present case). When contributing, an individual
exerts a positive externality on other individuals by raising the likelihood
that the good (public or private) will be produced. Free-riding may then be
observed. In our setting, as will be explained below, we treat this problem
by requiring that consumers’ expectations (about the contribution behavior
of other consumers) be fulfilled at equilibrium and by assuming that the
entrepreneur is able to somehow coordinate consumers’ decisions so as to
6Other studies have shown that advance-purchase discounts may arise in environments
where production capacity is limited or the aggregate level of demand is uncertain (Gale
and Holmes, 1992, 1993; Dana, 1998, 1999, 2001).
9
avoid free-riding. This simplification allows us to focus on other important
issues of crowdfunding. In contrast, the literature on threshold public goods
explicitly addresses the possibility of free-riding and examines the design
of optimal mechanisms for the provision of those goods when, for instance,
each individual has private information about the cost or benefit associated
with his or her participation in the provision of the good (Gradstein, 1994),
or when permitting continuous rather than binary “all-or-nothing” contribu-
tions (Cadby and Maynes, 1999), or under different rules of allocating excess
contributions if the total amount collected exceeds the required threshold
(Spencer et al., 2009).
3 Crowdfunding, pre-ordering and menu pricing
In this section, we focus on crowdfunding experiences where consumers are
invited to pre-order the product. For the entrepreneur to be able to launch
production, the amount collected through pre-ordering must cover the fixed
cost of production. Since the remaining consumers will pay a different price,
crowdfunding that takes the form of pre-ordering gives the opportunity to
price discriminate between the first group (those who pre-order and thus
constitute the investing “crowd”) and the second group (the other consumers
who wait that production takes place before purchasing directly).
Since the consumers who pre-order are those with a high willingness to
pay for the product, these will generally constitute the bulk of the “crowd”.
However, an entrepreneur is generally unable to identify these consumers.
The entrepreneur must then use some self-selecting device so as to induce
high-paying consumers to reveal themselves. The sort of ‘community ex-
perience’ that web-based crowdfunding offers may be a means by which
the entrepreneur enhances the perceived quality of the product for the con-
sumers who agree to pre-order it. In this sense, crowdfunding appears as a
form of menu pricing (i.e., of second-degree price discrimination).
The trade-off we explore in our model is thus the following: compared to
external funding, crowdfunding has the advantage of offering an enhanced
experience to some consumers and, thereby, of allowing the entrepreneur to
practice second-degree price discrimination and extract a larger share of the
consumer surplus; the disadvantage is that the entrepreneur is constrained
in the first period by the amount of capital that she needs to raise. The
10
larger this amount, the larger the number of consumers that have to be
attracted to cover it, which eventually reduces the profitability of the menu
pricing scheme.
In what follows, we first present our model; we then derive, in turn, the
outcome under traditional sources of financing (such as debt) and under
crowdfunding; finally, we derive the optimal funding choice.
3.1 Model
Suppose a unit mass of consumers identified by θ, with θ uniformly dis-
tributed on [0, 1]. The parameter θ denotes a consumer’s taste for an in-
crease in product’s quality. Consumers have unit demand (they buy one or
zero unit of the product). All consumers have a reservation utility r > 0
for the product; any increase from the basic quality is valued in proportion
to the taste parameter θ. Normalizing basic quality to zero, we have that
if consumer θ buys one unit of product of increased quality s sold at price
p, her net utility is r + θs−p.7 To ensure interior solutions at the pricing
stage, we assume:
Assumption 1. r < s < 2r.
The product is marketed by a monopolist. In our simple model, we
consider the quality of the product, s, as exogenous and known by the
consumers before purchase.8 For simplicity, we set to zero the marginal
cost of production. There is, however, a fixed cost of production K
> 0.
The timing of the game is as follows. In period zero, the entrepreneur
chooses her funding mechanism—traditional funding or crowdfunding—with
the following implications. If the entrepreneur chooses traditional funding,
then, in period 1, it incurs the fixed cost K, which is financed through, e.g.,
a bank loan; in period 2, the entrepreneur sets a price p for her product,
and consumers decide to buy or not.
On the other hand, if the entrepreneur chooses crowdfunding, then it
is able to set a menu pricing scheme. In period 1, the entrepreneur sets
7This problem was initially examined by Mussa and Rosen (1978). We use here the
results of the extended analysis of Bhargava and Choudary (2001).
8A natural extension of this framework would be to assume that the quality of the
product is unknown to the consumers before purchase. As observed in some crowdfunding
experiences, the entrepreneur may then use web-based crowdfunding to reveal information
about the product and, thereby, alleviate the experience good problem. We discuss this
possibility in the concluding section.
11
p1, the price for consumers who pre-order the product; the total revenue
collected through pre-orders is meant to cover the fixed cost of production.
In period 2, the entrepreneur sets two prices: pc, the price to be paid by
those consumers who have contributed to the financing of the venture (the
so-called “crowdfunders”), and pr, the price to be paid by those consumers
who have not (the so-called “regular consumers”).9 As for consumers, they
choose in period 1 whether to pre-order or not; in period 2, they decide
whether to purchase the product or not (as long as the product has been
put on the market, i.e., if total contributions in period 1 are at least as large
as K).
The key feature of crowdfunding from the point of view of the consumers
is that the participation to the mechanism may provide consumers with an
increase in the product quality. We have indeed observed in Section 2 that
entrepreneurs resorting to crowdfunding use the Internet to maintain an in-
teraction with their funders so as to provide them with so-called ‘community
benefits’. Various forms of rewards are sometimes offered but it appears that
these rewards are mostly symbolic and that crowdfunders essentially value
the feeling of belonging to a group of ‘special’ or ‘privileged’ consumers. It
is therefore important for the entrepreneur to attract a sufficient number
of regular (i.e., ‘non-privileged’) consumers to whom crowdfunders can feel
somehow ‘superior’. Denoting the number of regular consumers by nr and
the minimal number of them by ρ (with ρ ≥ 0), we capture these findings
in the model through the following assumption:
Assumption 2. Crowdfunders perceive the quality of the product to be equal
to s + σ, with σ > 0 if nr ≥ ρ and σ = 0 otherwise.
Assumption 2 translates the idea that crowdfunders enjoy some addi-
tional utility from the product compared to regular consumers as long as
the number of those regular consumers is above some threshold. To elim-
inate two sub-cases of very little interest, we put an upper bound on the
parameters σ and ρ:
Assumption 3. σ < s (r + s) / (2r).
Assumption 4. ρ < r/ (2s). 9The entrepreneur is able to recognize consumers who pre-ordered in period 1 and
therefore to tell them apart from regular consumers; no personal arbitrage is thus possible
in period 2.
12
The entrepreneur maximizes the present discounted value of her profits
over the two periods. Consumers maximize the present discounted value of
their net utility over the two periods. We assume that the entrepreneur and
the consumers have the same discount factor and we let 0 < δ ≤ 1 denote
it.
Two comments are warranted on the pricing schedule, which is meant to
be very general. First, contributors pay p1 + δpc in total, other consumers
pay δpr. This framework encompasses several, more restrictive schemes,
including full pre-payments (where contributors pay one single amount up-
front, equal to p1 + δpc) as well as ex post price discrimination (where each
type pays a different price). This means that we do not exogenously impose
pc and pr to be identical, although the framework here allows for this. Sec-
ond, by enabling the participating crowd to pay up-front only part of their
contribution, we avoid any price setting in which the entrepreneur would
raise funds well beyond what she really needs, namely K. Here, contribu-
tors provide in period 1 merely what is needed for starting production, the
rest being paid in period 2. As we will see, this implies that the first-period
price charged to crowdfunders (p1) is not directly set by the entrepreneur but
is rather indirectly determined by the interplay between the capital require-
ment K and the number of crowdfunders (noted nc), which depends itself
on the two second-period prices, pc and pr. These two prices are therefore
the two actual choice variables of the entrepreneur.
We now consider the choice of prices under the two funding mechanisms.
We then compare optimal profits in the two cases and address the choice of
funding mechanism.
3.2 Traditional funding
The case of traditional funding is straightforward. In period 1, the en-
trepreneur gathers funds and in period 2, she sets a uniform price p. All
consumers perceive that the product has quality s. Hence, the indifferent
consumer is such that r + θs−p ≥ 0, or θ ≥ (p−r) /s ≡ θ̂. As we assume
a unit mass of consumers uniformly distributed on the unit interval, we
have that the quantity demanded is equal to q (p) = 1 − θ̂ = 1 − (p−r) /s.
From the first-order condition for profit-maximization, we easily find that
the optimal price is p∗ = (r + s) /2. It follows that θ̂∗ = (s−r) /2s, which
is positive according to Assumption 1. We can then compute the optimal
13
gross profit as p∗
(
1 − θ̂∗
)
= (r + s)2 / (4s). The net profit under traditional
funding is thus equal to
πT =
{
δ
(r+s)2
4s
−K for K < δ (r+s)
2
4s
,
0 otherwise.
(1)
3.3 Crowdfunding
The crowdfunding case is more complex to analyze for two reasons. First,
the entrepreneur tries to achieve a form of second-degree price discrimina-
tion; profit is thus maximized under a set of incentive compatibility and
participation constraints. Second, in period 1 consumers who contemplate
pre-ordering the product must form expectations regarding the number of
consumers who will do likewise: the larger this number, the lower the pre-
ordering price as the fixed cost will be spread over more consumers, which
generates a form of network effects. We look for a subgame-perfect equilib-
rium of the game played by the entrepreneur and the consumers over the
two periods.
3.3.1 Consumer choices
Suppose that each consumer expects that a mass nec of consumers will choose
to pre-order and pay the price p1 set by the entrepreneur in period 1. We
adopt the fulfilled-expectations approach: consumers base their decision on
their expectation on the mass of contributors, and attention is restricted on
equilibria in which these expectations turn out to be correct (i.e., are ratio-
nal; see Katz and Shapiro, 1985). Two cases have to be distinguished. First,
if nec = 0, then it is optimal for each consumer not to contribute.
10 As the
initial expectation is realized, we have a fulfilled expectations equilibrium.
Naturally, crowdfunding is doomed to failure under such equilibrium. As
some successful crowdfunding experiences exist in reality, it seems natural
to assume that entrepreneurs can find some ways to coordinate consumers
so that this ‘bad’ equilibrium is not selected.11
The second case is the case of interest. For any nec > 0, the entrepreneur
can set p1 such as p1nec ≥ K. As there is no need to gather more capital
10This is so because each consumer is infinitesimal and thus cannot on his own make
sure that the product will be put on the market.
11Another reason to select the ‘good’ equilibrium is that it clearly Pareto-dominates the
‘bad’ equilibrium.
14
than needed, we have p1 = K/nec. So, if consumers expect a positive mass
of contributors, they can be sure that the good will be produced.12 They
also realize that the lower their expectation, the larger the value of p1, i.e.,
the contribution that will be asked by the entrepreneur.
To decide whether to pre-order or not, consumer θ compares his ex-
pected utility in the two options. Let us consider for the moment that the
entrepreneur attracts a sufficient number of regular consumers at equilib-
rium: nr ≥ ρ. (Naturally, we will have to check below if this condition is
actually met.) If the consumer pre-orders, he pays p1 = K/nec today and
gets tomorrow a product of enhanced quality (s + σ). We can thus express
the expected utility of a crowdfunder as
Uec = −
K
nec
+ δ (r + θ (s + σ) −pc) .
If the consumer decides not to pre-order, he does not pay anything today
and he gets tomorrow a product of quality s at price pr. Hence, his expected
utility as regular consumer is
Uer = δ (r + θs−pr) .
So, for a consumer to contribute, we must have
Uec ≥ U
e
r ⇔ δ (θσ + pr −pc) ≥
K
nec
⇔ θ ≥
K
δσnec
−
pr −pc
σ
≡ θ̄ (nec) .
All consumers with a value of θ larger than θ̄ (nec) prefer to pre-order. We
observe logically that the mass of crowdfunders increases as (i) the expected
number of contributors (nec) increases, (ii) the capital requirement (K) de-
creases, (iii) the enhancement in quality (σ) resulting from pre-ordering
increases, (iv) the difference between the price for regular consumers and
for crowdfunders (pr −pc) increases.
To ease the exposition, we define ∆ ≡ pr−pc; that is, ∆ is the difference
between the second period prices for regular consumers and crowdfunders.
For a given expected mass of crowdfunders nec, the actual mass of crowd-
funders is equal to nc = 1 − θ̄ (nec). We require fulfilled expectations at
12Provided that the entrepreneur does not find it profitable to run away with the contri-
butions at the start of period 2. We consider this issue in Subsection 3.5. For the moment,
we assume that the entrepreneur is able to credibly commit that she will not run away.
15
equilibrium: nc = nec. We must thus solve
nc = 1 +
∆
σ
−
K
δσnc
.
This equation is represented in Figure 1: solutions are the intersection
between the 45◦ line (nc) and the function 1 + ∆σ −
K
δσnc
, which is increasing
and concave in nc. Figure 1 depicts the latter function for different values
of ∆. We observe that an intersection exists as long as
∆ ≥ σ
(
2
√
K/ (δσ) − 1
)
≡ ∆. (2)
To understand the meaning of this condition, let us describe what happens
when it is violated. For ∆ < ∆, the price charged to crowdfunders is not
sufficiently smaller than the price charged to regular consumers, so that a
large value of nec is needed to convince consumers to pre-order the prod-
uct; indeed, the larger the expected number of crowdfunders, the lower the
price p1 each crowdfunder has to pay in period 1, which increases the at-
tractiveness of pre-ordering, other things being equal. Yet, the number of
consumers who actually decide to pre-order always remains smaller than the
expected number, meaning that expectations cannot be fulfilled (i.e., there
is no solution to the above equation). Note that the threshold ∆ logically
increases with K: the higher the capital requirement, the more difficult it
becomes for expectations to be fulfilled. Note also that at ∆ = ∆, there is
a unique solution, which is easily computed as nc =
√
K/ (δσ). This value
is strictly lower than unity as long as K < δσ, which we assume for the
moment.13 For ∆ > ∆, there are two intersections. As we expect the mass
of crowdfunders to increase with ∆, we select the largest value of nc, which
is computed as
nc =
1
2σ
(
σ + ∆ +
√
(σ + ∆)2 −
(σ + ∆)2
)
. (3)
As shown in Figure 1, this value is strictly smaller than unity for ∆ < K/δ.
3.3.2 Optimal prices
Suppose for now that nc < 1. We have then that nc consumers pre-order the product at price p1 and buy it in period 2 at price pc. As for the
13For K ≥ δσ, the fulfilled-expectations equilibrium is such that all consumers become
crowdfunders. This implies that there can be no regular consumers and that σ inevitably
falls to zero. This possibility is examined under Case 2b below.
16
1
1
n
K /(!”)
! = !
! = K /”
Figure 1: Fulfilled expectations equilibrium
other consumers, they buy the product as long as r + θs − pr ≥ 0, or
θ ≥ (pr −r) /s ≡ θ̂. If 0 < (pr −r) /s < 1 − n, the number of regular
consumers is equal to nr = 1 − n − (pr −r) /s. As long as nr > ρ, the
entrepreneur’s profit can be written as
π = p1nc −K︸ ︷︷ ︸
=0
+δpcnc + δprnr
= δpr
(
1 −
pr −r
s
)
−δ∆
1
2σ
(
σ + ∆ +
√
(σ + ∆)2 − (σ + ∆)2
)
,
where the second line is obtained by substituting expression (3) for nc, and
∆ for pr −pc. It is equivalent to maximize π over pr and pc, or over pr and
∆; we choose the latter option.
It is easily found that the first-order condition with respect to pr yields
the optimal value p∗r = (r + s) /2, which implies that θ̂ = (p
∗
r −r) /s =
(s−r) /2s.
The derivative of profit with respect to ∆ is
dπ
d∆
= −
δ
2σ
[
σ + 2∆ +
√
(σ + ∆)2 − (σ + ∆)2 + ∆(σ+∆)√
(σ+∆)2−(σ+∆)2
]
. (4)
It is clear that the bracketed term is strictly positive for positive values
17
of ∆. Hence, any interior solution must be such that ∆ < 0 (i.e., that pr < pc, meaning that crowdfunders pay more than other consumers in period 2). Because of the constraint imposed by (2), this is only possible if ∆ is negative, which is equivalent to K < (δσ) /4. We therefore have to distinguish between two cases (we sketch the results here and refer the reader to the appendix for the detailed computations).
Case 1: K < (δσ) /4. In this case, we solve dπ/d∆ = 0 for ∆ and find:
∆∗ =
4K −
δσ
2δ
.
We verify that K < (δσ) /4 implies that ∆∗ < 0, i.e. that p∗c > p
∗
r: crowd-
funders pay more than other consumers in period 2 (we will return to this
below). We also compute that the number of crowdfunders is given by
n∗c = 1/2. Hence, at (p
∗
r, ∆
∗), consumers split into three groups: those with
θ ∈ [0, (s−r) /2s] do not consume, those with θ ∈ [(s−r) /2s, 1/2] buy in
period 2, and those with θ ∈ [1/2, 1] pre-order in period 1. We compute the
equilibrium number of regular consumers as n∗r = 1/2 − (s−r) /2s = r/2s.
From Assumption 4, we have that n∗r > ρ, which implies that σ > 0 as
initially assumed. We then compute the optimal profit as
π
= δ
(r + s)2
4s
+
δσ
4
−K. (5)
In the present case, the capital requirement imposes no constraint what-
soever on the entrepreneur. To see this, let us first compute the total price
paid by crowdfunders. It is equal to p1 + δpc = δ2 (r + s + σ). Next, we
observe that this is exactly the price that the entrepreneur would set if it
was only selling in period 1 a product of quality (s + σ) to be delivered in
period 2. Indeed, the indifferent consumer would be identified by θ0 such
that −p + δ (r + θ0 (s + σ)) = 0, which is equivalent to θ0 = 1s+σ
(
1
δ
p−r
)
.
The entrepreneur would then maximize π = δ (p (1 −θ0)). It is easy to check
that the optimal price is indeed p = 1
2
δ (r + s + σ).
Case 2: K ≥ (δσ) /4. Here, ∆ ≥ 0 under condition (2). Then, expres-
sion (4) is clearly negative, meaning that the optimal choice is the lowest
admissible value of ∆, i.e., ∆ = ∆ > 0. The intuition goes as follows: the
higher capital requirement, combined to the fulfilled expectations require-
ment, forces the entrepreneur to give a discount to crowdfunders (pc < pr)
18
but the entrepreneur prefers to keep this discount as small as possible. The
number of crowdfunders is then given by
nc =
1
2
+
∆
2σ
=
√
K/ (δσ) ≥
1
2
.
We see thus that the entrepreneur has to attract a larger number of crowd-
funders than in the previous, unconstrained, case; this number grows with
K (and remains smaller than unity as long as K < δσ).
As the number of crowdfunders grows, it is not clear whether the en-
trepreneur still finds it optimal to attract a sufficient number of regular
consumers in period 2. It does so as long as 1 − nc − (p∗r −r) /s ≥ ρ. As
p∗r = (r + s) /2, the latter condition is equivalent to
K ≤ δσ
(
r + s
2s
−ρ
)2
≡ K1 (σ,ρ) .
It can be checked that Assumptions 1 and 4 ensure that K1 (σ,ρ) is com-
prised between (δσ) /4 and δσ; it is also clear that K1 increases with σ and
decreases with ρ. There are thus two subcases to consider.
Case 2a: (δσ) /4 ≤ K ≤ K1 (σ,ρ) . Here, as nr ≥ ρ, we have that
σ > 0 for crowdfunders and we can compute the equilibrium value of pc
as p∗c = p
∗
r − ∆ = (r + s) /2 − 2σ
√
K/ (δσ) + σ (which is positive under
Assumption 3). The equilibrium profit is then equal to
π = δ
(r + s)2
4s
+
√
δσK − 2K. (6)
Case 2b: K > K1 (σ,ρ) . In this case, given nc and p
∗
r, the number of
regular consumers is too low for crowdfunders to enjoy any additional utility
through ‘community benefits’. The entrepreneur faces then the following
alternative: she either adjusts pr so as to keep nr above ρ and, thereby,
σ > 0, or she accepts nr < ρ, σ = 0 and maximizes a different objective
function. We show in the appendix that the latter option is equivalent, in
terms of equilibrium profits, to traditional funding. As for the former option,
the entrepreneur sets the price pr such that nr = ρ, which is equivalent to
pr = r + s−s
(√
K/ (δσ)
+ ρ
)
.
The price for crowdfunders is then computed as pc = pr − ∆ = r + s + σ −
sρ−(s + 2σ)
√
K/ (δσ). It seems reasonable to exclude negative prices. We
19
have thus that this option is feasible as long as pc ≥ 0, which is equivalent
to
K ≤ δσ
(
r + s + σ −sρ
s + 2σ
)2
≡ K2 (σ,ρ) .
We show in the appendix that Assumption 3 implies that K2 (σ,ρ) > K1 (σ,ρ).
Hence, for K1 (σ,ρ) < K ≤ K2 (σ,ρ), the option of setting pr so that nr = ρ
yields the following profit:
π = δ
(
r + s−s
(√
K/ (δσ) + ρ
))(√
K/ (δσ) + ρ
)
+
√
δσK − 2K. (7)
We will show below that the latter function decreases with K. At K = K2,
we have pc = 0, pr > 0 and nr = ρ > 0; it follows that the entrepreneur still
earns positive profits in this extreme case. The question remains, however,
whether this option is more profitable than traditional funding or not. We
will examine this issue in the next section but before, we collect our results
and perform some comparative statics exercises.
Summary. Combining expressions (5) to (7), we can express equilibrium
profits in the crowdfunding case as
πC =
δ
(r+s)2
4s
+ δσ
4
−K for K
< δσ
4
,
δ
(r+s)2
4s
+
√
δσK − 2K for δσ
4
≤ K ≤ K1,
δ
(
r + s−sρ−s
√
K
δσ
)(√
K
δσ
+ ρ
)
+
√
δσK − 2K
for K1 < K ≤ K2. (8)
We show in the appendix that each segment of this profit function is
a decreasing function of K and an increasing function of σ; moreover, the
third segment is a decreasing function of ρ. We record these results in the
following proposition.
Proposition 1 The equilibrium profit under crowdfunding decreases with
the capital requirement (K) and with the minimal number of regular con-
sumers required to generate community benefits (ρ); it increases with the
magnitude of community benefits (σ).
The intuition behind these comparative static results is clear. The capital
requirement has a twofold negative impact on profit: on the one hand, it
makes production more expensive and on the other hand, it reduces the
possibility to implement the optimal menu pricing scheme. An increase in
20
the minimal number of regular consumers required to generate community
benefits also constraints price discrimination and thereby negatively affects
profits. Indeed, when ρ increases, communuty benefits cannot be shared as
broadly as before. Finally, if crowdfunders have a higher valuation for the
community benefits, their willingness to pay increases and the entrepreneur
is able to increase her margins.
3.4 Choice of funding method
Comparing expressions (8) and (1), we observe first that for small values of
K (K ≤ (δσ) /4), crowdfunding clearly yields larger profits than traditional
funding. The intuition is obvious: in this region of parameters, crowdfunding
allows the entrepreneur to optimally price discriminate between the high-
valuation crowdfunders and the remaining consumers. As the ‘enhanced
quality’ σ comes at no cost for the entrepreneur, menu pricing performs
better than the uniform pricing that prevails under traditional funding.
For larger values of K, however, the entrepreneur is constrained to im-
plement corner solutions under crowdfunding. Here, σ is no longer a sort of
‘manna from heaven’ for the entrepreneur: several requirements constrain
the prices that the entrepreneur can choose, which inevitably reduces her
profits. The first constraining requirements are the network effects among
crowdfunders and the imposition of fulfilled expectations. Nevertheless,
crowdfunding still dominates for values of K comprised between (δσ) /4 and
K1 (σ,ρ): πC −πT =
√
δσK −K, which is positive as K ≤ K1 (σ,ρ) < δσ.
Yet, an additional constraint bites for K1 (σ,ρ) < K ≤ K2 (σ,ρ), namely the minimal number of regular consumers necessary to generate the commu- nity benefits for crowdfunders (combined with the non-negativity of prices). We show in the appendix that the profit under crowdfunding may fall under the profit under traditional funding when the capital requirement becomes large enough. More precisely, we find that for K1 (σ,ρ) < K ≤ K2 (σ,ρ), πC −πT if and only if K ≤ K3 (σ,ρ), with
K3 (σ,ρ) ≡ δσ
(
s(r+s+σ−2sρ)+
√
σs(4sρ(r−sρ)+σs+s2−r2)
2s(s+σ)
)2
.
We show in the appendix that K3 (σ,ρ) > K1 (σ,ρ) and that, for given values
of the other parameters, there exists a value σ̂ such that K2 (σ,ρ) > K3 (σ,ρ)
for σ < σ̂ and K2 (σ,ρ) < K3 (σ,ρ) for σ > σ̂. Moreover, it is intuitive that
the three thresholds increase with σ and decrease with ρ.
21
!”
K
! (r +s)
2
4s
!T = 0
!C = !T
K3(!,”)
K2(!,”)
Crowdfunding
Traditional
funding
No activity
s(r +s)
2r
Figure 2: Choice of funding method
We collect our results in the following proposition and we depict them
in Figure 2.
Proposition 2 In situations where an entrepreneur can use crowdfunding
and pre-sales to induce self-selection of high paying consumers, crowdfund-
ing is preferred over traditional funding if the capital requirement is below
some threshold value (i.e., K ≤ min{K2 (σ,ρ) ,K3 (σ,ρ)}). This condition
becomes less stringent as community benefits become more important, either
because their magnitude (σ) increases or because they are generated more
easily (ρ decreases).
One important implication of Proposition 1 is that the level of addi-
tional benefits accruing to the pre-ordering crowd (i.e., σ) must be suffi-
ciently large. If the crowd does not enjoy any of such benefits or utility,
crowdfunding does not yield any benefits over traditional funding for the
entrepreneur. The parameter σ can be seen as additional utility or bene-
fits from a community-based experience. Then, the lack of a community
would result in a value of σ equal to zero. An important implication is the
need for the entrepreneur to identify and target this community. While con-
sumers with a high willingness to pay for the product may self-select into
the community, the entrepreneur still needs to ensure that the “crowd” can
22
generate these additional benefits. The following managerial lesson can thus
be drawn from our analysis: entrepreneurs who cannot identify or create a
community around their products so that this community enjoys additional
benefits, will hardly ever opt for crowdfunding. Indeed, we observe on Figure
2 that as σ decreases, the range of values of K for which crowdfunding is
preferred narrows down.
The previous finding is consistent with many observed crowdfunding ini-
tiatives. Indeed, while some offer monetary rewards, an important other
form of reward is recognition or credits offered to crowdfunders. The im-
portance of non-monetary benefits for crowdfunders is further stressed by
the observation that at equilibrium, crowdfunders always end up paying a
larger total price than regular consumers. To see this, we compute the dif-
ference (p∗1 + δp
∗
c) −δp∗r in the three regimes. We find that this difference is
equal to δσ/2 for K < δσ/4, and to δσ (
1 −
√
K/ (δσ)
)
for K ≥ δσ/4. As
crowdfunding is not feasible for K > δσ, we check that (p∗1 + δp
∗
c) > δp
∗
r for
all admissible values of the parameters. This result is not surprising insofar
as crowdfunders are high-valuation consumers and that their willingness to
pay is further enhanced by the community benefits.
3.5 Take the money and run
In the previous analysis, we have abstracted away the possibility that the
entrepreneur could “take the money and run” at the start of period 2, i.e., to
collect p1 from the crowdfunders without incurring the fixed cost and thus,
without producing the product. That is, we implicitly assumed that the en-
trepreneur had some form of commitment at her disposal to guarantee her
second-period activity. Absent such commitment device, consumers would
only be convinced that production will take place if it is indeed in the en-
trepreneur’s best interest; otherwise, no consumer would agree to pre-order
the product and crowdfunding would fail. The entrepreneur’s net profit
when producing must then be at least as large as the total amount that is
collected at the end of period 1, i.e., K. We show in the appendix that
πC ≥ K ⇔ K ≤ K4 (σ,ρ)
23
with14
K4 (σ,ρ) ≡
δσ
(
(r+s(1−2ρ)+σ)+
√
−12sσρ2+4σ(3r+2s)ρ+(r+s+σ)2
2(s+3σ)
)2
for 0 < σ ≤ σ1,
δσ
36
(
1 +
√
1 + 3 (r+s)
2
σs
)2
for σ1 ≤ σ ≤
s(r+s)
2r
,
σ1 ≡
s(r+s)2
(r+s−2sρ)(3r+s−6sρ).
As depicted on Figure 3, K4 (σ,ρ) lies below the minimum of K2 (σ,ρ)
and K3 (σ,ρ) for sufficiently large values of σ and sufficiently large values
of K.15 This implies that when consumers may fear that the entrepreneur
could take the money and run, crowdfunding becomes harder to implement:
there exists indeed a region of parameters (characterized by high values of
σ and K) where consumers will not agree to pre-order the product as they
rightfully anticipate that the entrepreneur will not put the product on the
market. For these parameters, traditional funding appears as the only option
(assuming, of course, that banks are better equipped than crowdfunders to
prevent the entrepreneur’s default). We record this result in the following
proposition.
Proposition 3 When the entrepreneur has no credible way to commit that
she will not run away with the money collected in period 1, crowdfunding is
less likely to be preferred to traditional funding.
4 Concluding remarks
This paper sheds light on crowdfunding practices of entrepreneurial activ-
ities. It stresses the need for building a community that ultimately enjoys
additional private benefits from their participation to make crowdfunding
a viable alternative to investor- or creditor-based funding such as through
banks, business angels or even venture capital. In setting up the initiative,
the entrepreneur potentially faces the following trade-off. Crowdfunding al-
lows for price discrimination if pre-ordering is used. The capacity to opti-
mally implement price-discrimination between pre-ordering consumers (the
14The second branch of K4 only obtains for sufficiently small values of ρ.
15Logically, K4 (σ,ρ) (where πC = K) intersects with K3 (σ,ρ) (where πC = πT ) at
K = δ (r + s)
2
/ (8s), which is the value of K such that πT = K. Above this threshold,
we have that for any σ, K4 (σ,ρ) < K3 (σ,ρ).
24
!”
K
! (r +s)
2
4s
!T = 0
!C = !T
K3(!,”)
K2(!,”)
Crowdfunding
Traditional
funding
No activity
s(r +s)
2r
K4(!,”)
!C = K
Figure 3: Funding method if the entrepreneur can take the money and run
crowdfunders) and other consumers may however be constrained by the
amount of capital that the entrepreneur needs to raise to cover the up-front
(fixed) costs. Whenever this amount exceeds some threshold, the distortion
in the price discrimination becomes excessive, in which case the profitability
of the crowdfunding initiative is reduced and the entrepreneur may be better
off approaching a single, larger investor (a bank or a large equity investor)
who can cover the full costs on its own.
To our knowledge, this is the very first study offering a theoretical anal-
ysis of crowdfunding. It also highlights new follow-up research questions
on the topic. For instance, an interesting avenue for future research is to
incorporate the fact that the crowdfunders can at times also participate in
strategic decisions or even have voting rights. In this case, control rights
and voting power become an additional benefit for the participating crowd.
Crowdfunding through pre-ordering will have a very different effect on in-
formation and voting results than if the crowd purchases equity in the en-
trepreneurial firm. Also, outcomes of votes can provide valuable insights into
the optimal design of products if the voting community is representative for
the overall population of end-consumers.
Future works may further explore information motivations of entrepreneurs.
Indeed, while the primary goal of crowdfunding is certainly to raise money,
it may also help firms in testing, promoting and marketing their products,
25
in gaining a better knowledge of their consumers’ tastes, or in creating new
products or services altogether. In this sense, crowdfunding can be used as a
promotion device, as a means to support mass customization or user-based
innovation, or as a way for the producer to gain a better knowledge of the
preferences of its consumer. Crowdfunding seems thus to have implications
that go beyond the financial sphere of an organization: it also affects the
flow of information between the organization and its customers.
In any case, a strong advantage of this form of financing is the attention
that the entrepreneur may attract on his/her project or company. This can
become a vital asset for many of them, especially for artists or entrepreneurs
in need to present their talent and product to the crowd (as potential cus-
tomers). In other cases, it is a unique way to validate original ideas in front
of a specifically targeted audience. This may in turn provide insights into
market potential of the product or service offered. From this perspective,
crowdfunding may be viewed as a broader concept than purely raising funds:
it is a way to develop corporate activities through the process of fundraising.
Also, several platforms have emerged recently, such as IndieGoGo, Kick-
starter, Sandawe, SellaBand, MyMajorCompany and Artistshare. These
platforms intermediate between entrepreneurs and potential crowdfunders.
Therefore, a distinction can be made between direct and indirect fundraising
because at times entrepreneurs make use of such crowdfunding platforms in-
stead of seeking direct contact with the crowd. These platforms share some
similarities with online lending markets (Everett, 2008; Freedman and Jin,
2010); while the latter more prominently target social entrepreneurship,
crowdfunding platforms have a broader scope of entrepreneurial initiatives.
Our understanding of the role played by platforms is still limited; it is worth
investigating the extent to which platforms increase the chances of success
of crowdfunding initiatives or solve asymmetric information issues. As an
example, for crowdfunders, platforms may facilitate in learning the quality
of the product through the possible interaction between crowdfunders (e.g.,
via other crowdfunder comments on a forum) or by observing the contribu-
tions of other crowdfunders. More research could be done along the line of
peer effects as it relates to crowdfunding platforms, as suggested by Ward
and Ramachandran (2010).
From a more general perspective, crowdfunding practices raise questions
with respect to corporate governance and investor protection issues if most
26
individuals only invest tiny amounts. Crowdfunders are most likely to be
offered very little investor protection. This may lead to corporate gover-
nance issues, which in turn may entail reputation concerns if some cases of
fraud or bad governance are uncovered. Crowdfunders have very little scope
to intervene to protect their interests as stakeholders. Moreover, the fact
that their investment is small is likely to create a lack of incentive to inter-
vene. Therefore, trust-building is an essential ingredient for any successful
crowdfunding initiative. It is also not a surprise that many of the observed
crowdfunded initiatives are either project-based or based on donations. In
many cases, the financial return seems to be of secondary concern for those
who provide funds. This suggests that crowdfunders care about social rep-
utation or enjoy private benefits from participating in the success of the
initiative (Glaeser and Shleifer, 2001; Ghatak and Mueller, 2011).
5 Appendix
We give here the details of the mathematical developments that we sketched
in the text.
5.1 Optimal prices under crowdfunding
Case 1. If K < (δσ) /4, then there may exist a value of ∆ ≥ ∆ that solves dπ/d∆ = 0, or
σ + 2∆ +
√
(σ + ∆)2 − (σ + ∆)2 + ∆(σ+∆)√
(σ+∆)2−(σ+∆)2
= 0 ⇔
√
(σ + ∆)2 − (σ + ∆)2 =
(σ + ∆)2
σ + 2∆
− (σ + ∆) (9)
As long as the RHS is positive, we can take the square of the two sides of
the equality:
(σ + ∆)2 − (σ + ∆)2 =
(σ + ∆)4
(σ + 2∆)2
+ (σ + ∆)2 − 2
(σ + ∆) (σ + ∆)2
σ + 2∆
,
which, after simplification, yields
∆∗ =
1
2σ
[
(σ + ∆)2 −σ2
]
=
1
2δ
(4K −δσ) .
We still need to check whether condition (2) is satisfied:
1
2σ
[
(σ + ∆)2 −σ2
]
> ∆ ⇔ 2σ∆ + ∆2 > 2σ∆,
27
which is true. We also need to check that the RHS of expression (9) is
positive, as we assumed it.
We compute
(σ + ∆)2
σ + 2∆
> (σ + ∆) ⇔
4σK/δ
4K/δ
>
4K + δσ
2δ
⇔ 2δσ > 4K + δσ ⇔ K < δσ/4
which is true.
To proceed, we compute
σ + ∆∗ =
1
2σ
[
(σ + ∆)2 + σ2
]
,√
(σ + ∆∗)2 − (σ + ∆)2 =
1
2σ
[
σ2 − (σ + ∆)2
]
.
It follows that
n∗ =
1
2σ
(
1
2σ
[
(σ + ∆)2 + σ2
]
+
1
2σ
[
σ2 − (σ + ∆)2
]
)
=
1
2
.
Recall that we need
pr −r
s
< 1 −n ⇔ s−r s
< 1 2 ⇔ s < 2r,
which is guaranteed by Assumption 1.
We can now compute the optimal profit:
π = δ
(r + s)2
4s
−δ∆∗
1
2
σδ
(δ (σ + ∆∗) −δ∆∗)
= δ
(r + s)2
4s
+
δσ
4
−K.
Case 2. We first have to establish under which condition there is a suffi-
cient number of regular consumers. We need 1 − nc − (p∗r −r) /s ≥ ρ. As
nc =
√
K/ (δσ) and p∗r = (r + s) /2, the condition can be rewritten as
1 −
√
K
δσ
−
s−r
2s
≥ ρ ⇔ K ≤ δσ
(
r + s
2s
−ρ
)2
≡ K1 (σ,ρ) .
We compute
K1 (σ,ρ) −
δσ
4
=
σδ (r + 2s− 2sρ) (r − 2sρ)
4s2
> 0,
δσ −K1 (σ,ρ) =
σδ (r + 3s− 2sρ) (s + 2sρ−r)
4s2
> 0,
which are both positive because of Assumptions 1 (s > r) and 4 (ρ < r/ (2s)).
28
Case 2a: (δσ) /4 ≤ K ≤ K1 (σ,ρ) . We need to show that p∗c = p∗r −
∆ = (r + s) /2 − 2σ
√
K/ (δσ) + σ ≥ 0. This condition is equivalent to
K ≤ δσ
(
r + s + 2σ
4σ
)2
≡ K5 (σ,ρ) .
We have K5 (σ,ρ) > K1 (σ,ρ)
if and only if
r + s + 2σ
4σ
>
r + s
2s
−ρ ⇔ ρ > −
s (r + s) − 2rσ
4sσ
≡ ρ̃.
Assumption 3, i.e., σ < s (r + s) / (2r), implies that ρ̃ < 0 and hence, that the inequality is satisfied, meaning that p∗c > 0 when K ≤ K1 (σ,ρ).
Case 2b: K > K1 (σ,ρ) . We showed in the text that pc ≥ 0 as long
as
K ≤ δσ
(
r + s + σ −sρ
s + 2σ
)2
≡ K2 (σ,ρ) .
We have that K2 (σ,ρ) > K1 (σ,ρ) is equivalent to
r + s + σ −sρ
s + 2σ
>
r + s
2s
−ρ ⇔
s (r + s) − 2rσ + 4sσρ
2s (s + 2σ)
> 0,
which is true under Assumption 3 as 2rσ < s (r + s). We also need to show that when the entrepreneur accepts nr < ρ (which
implies σ = 0), she achieves the same profit as under traditional funding.
Suppose first that the entrepreneur decides to attract no regular consumer
whatsoever. She can do so by setting p > r + s. In that case, a consumer
decides to pre-order the product (which is the only option) if
−
K
nec
+ δ (r + θs−pc) ≥ 0 ⇔ θ ≥
K
δsnec
−
r −pc
s
.
As we require fulfilled expectations, we must have
nc = 1 −
K
δsnc
+
r −pc
s
.
Solving the latter equation and keeping the largest root, we have
n =
δ (r + s−pc) +
√
δ2 (r + s−pc)2 − 4δsK
2δs
,
which is valid as long as pc ≤ r + s− 2
√
sK/δ.
29
The entrepreneur choose pc to maximize
π = pc
δ (r + s−pc) +
√
δ2 (r + s−pc)2 − 4δsK
2δs
.
Solving for the first-oder condition, we find the optimal price as
pc =
r + s
2
−
2s
δ (r + s)
K
and we check that it is indeed no larger than r + s− 2
√
sK/δ as required.
We can then compute the number of consumers as n = (r + s) / (2s) and
the optimal profit as:
π = δ
(
r + s
2
−
2s
δ (r + s)
K
)
r + s
2s
= δ
(r + s)2
4s
−K = πT .
Alternatively, the entrepreneur could still attract some regular consumers
(but less than ρ). To do so, she must set pr < r + s. A consumer would
then choose to pre-order the product if
−
K
nec
+ δ (r + θs−pc) ≥ δ (r + θs−pr) ⇔
K
nec
≤ δ (pr −pc) ,
which is clearly impossible if pc ≥ pr. Suppose then pc < pr. The latter condition can we rewritten as
nec ≥
K
δ (pr −pc)
.
Expectations are no longer an issue in the present case. Taking nc =
K/(δ (pr −pc)), we express the entrepreneur’s profit as
π = δpc
K
δ (pr −pc)
+δpr
(
1 −
K
δ (pr −pc)
−
pr −r
s
)
= δpr
(
1 −
pr −r
s
)
−K,
which is exactly the same profit function as under traditional funding; this
completes our proof.
5.2 Proof of Proposition 1
We have that profits under crowdfunding are equal to πC1 for K < δσ4 , to πC2 for δσ4 ≤ K ≤ K1, and to πC3 for K1 < K ≤ K2, with
πC1 = δ
(r+s)2
4s
+ δσ
4
−K,
πC2 = δ
(r+s)2
4s
+
√
δσK − 2K,
πC3 = δ
(
r + s−sρ−s
√
K
δσ
)(√
K
δσ
+ ρ
)
+
√
δσK − 2K.
30
It is obvious that πC1 increases with σ and decreases with K. As for πC2,
it clearly increases with σ while its derivative with respect to K is equal to
∂πC2
∂K
=
√
δσ
1
2
√
K
− 2.
The latter expression is negative if K > δσ/16, which is the case here.
Regarding πC3, we first compute:
∂πC3
∂K
=
(r + s + σ − 2sρ)
√
σδK − 2 (s + 2σ) K
2σK
.
The latter expression is negative if and only if
K > δσ
(
r + s + σ − 2sρ
2 (s + 2σ)
)2
≡ K6 (σ,ρ) .
We consider here values of K > K1 (σ,ρ). Let us show that Assumption 4,
i.e., ρ < r/ (2s), makes sure that K1 (σ,ρ) > K6 (σ,ρ). The latter condition
is equivalent to
r + s
2s
−ρ−
r + s + σ − 2sρ
2 (s + 2σ)
=
1
2
σ
2 (r − 2sρ) + s
s (s + 2σ)
> 0.
Second, we have
∂πC3
∂σ
=
2sK − (r − 2sρ + s−σ)
√
σδK
2σ2
.
If σ > r − 2sρ + s, then the latter expression is clearly positive. Otherwise,
it is positive as long as
K > δσ
(
r − 2sρ + s−σ
2s
)2
≡ K7 (σ,ρ) .
We show again that K1 (σ,ρ) > K7 (σ,ρ), which is equivalent to
r + s
2s
−ρ−
r − 2sρ + s−σ
2s
=
σ
2s
> 0.
Finally, we compute
∂πC3
∂ρ
= δ
(
r + s− 2sρ− 2s
√
K
σδ
)
.
This expression is negative for
K > δσ
(
r + s− 2sρ
2s
)2
= K1 (σ,ρ) ,
which completes the proof.
31
5.3 Proof of Proposition 2
We first derive the value of K such that π3C = πT .
δ
(
r + s−sρ−s
√
K
δσ
)(√
K
δσ
+ ρ
)
+
√
δσK − 2K = δ
(r + s)2
4s
−K ⇔
−(s + σ) K+(r + s + σ − 2sρ)
√
δσ
√
K+δσ (r + s−sρ) ρ−δσ
(r + s)2
4s
= 0.
This second-degree polynomial in
√
K has real roots as long as
(r + s + σ − 2sρ)2 δσ + 4 (s + σ)
(
δσ (r + s−sρ) ρ−δσ (r+s)
2
4s
)
=
σ2δ
s
(
4sρ (r −sρ) + sσ + s2 −r2
)
> 0,
which is satisfied under Assumptions 1 and 4. The roots are then given by
√
K =
√
δσ
s (r + s + σ − 2sρ) ±
√
σs (4sρ (r −sρ) + σs + s2 −r2)
2s (s + σ)
.
Some lines of computations establish that both roots are positive and that
δσ (r + s−sρ) ρ < δσ (r+s)
2
4s
under our assumptions. It follows that πC3 > πT
if and only if
δσ
(
s(r+s+σ−2sρ)−
√
σs(4sρ(r−sρ)+σs+s2−r2)
2s(s+σ)
)2
< K
< δσ ( s(r+s+σ−2sρ)+ √ σs(4sρ(r−sρ)+σs+s2−r2) 2s(s+σ)
)2
= K3 (σ,ρ) .
We establish now that K1 (σ,ρ) lies between these two bounds. First,
the upper bound (i.e., K3) being larger than K1 (σ,ρ) is equivalent to
s(r+s(1−2ρ)+σ)+
√
σs(4sρ(r−sρ)+σs+s2−r2)
2s(s+σ)
>
r + s
2s
−ρ ⇔√
σs (4sρ (r −sρ) + σs + s2 −r2) > σ (r − 2sρ) ⇔
σ (s−r + 2sρ) (r − 2sρ + s) (s + σ) > 0,
which is satisfied under Assumptions 1 (s > r) and 4 (ρ < r/ (2s)). As for the lower bound being smaller than K1 (σ,ρ), this is so if
s(r+s(1−2ρ)+σ)−
√
σs(4sρ(r−sρ)+σs+s2−r2)
2s(s+σ)
<
r + s
2s
−ρ ⇔√
σs (4sρ (r −sρ) + σs + s2 −r2) > −σ (r − 2sρ) ,
32
which is clearly satisfied under Assumption 4. We can thus state that when
K > K1 (σ,ρ),
πC > πT ⇔ K ≤ δσ
(
s(r+s+σ−2sρ)+
√
σs(4sρ(r−sρ)+σs+s2−r2)
2s(s+σ)
)2
= K3 (σ,δ) .
We show next that for given values of the other parameters, there exists
a value σ̂ such that K2 (σ,ρ) > K3 (σ,ρ) for σ < σ̂ and K2 (σ,ρ) < K3 (σ,ρ)
for σ > σ̂. For δσ > 0, we have
K2 (σ,ρ)−K3 (σ,ρ) ∝ r+s+σ−sρs+2σ −
s(r+s(1−2ρ)+σ)+
√
σs(−4s2ρ2+4rsρ+s2−r2+σs)
2s(s+σ)
.
The latter expression tends to (r + s) / (2s) when σ tends to zero, and to
−1/2 when σ tends to infinity. As both K2 and K3 are increasing functions
of σ, there exists a value of σ below which K2 > K3 and above which
K3 > K2. Numerical simulations suggest that this cutoff value of σ is
smaller than s (r + s) / (2r), i.e., the upper bound we have assumed for σ.
5.4 Proof of Proposition 3
Recall that profits under crowdfunding are equal to πC1 for K < δσ4 , to πC2 for δσ
4
≤ K ≤ K1, and to πC3 for K1 < K ≤ K2, with
πC1 = δ
(r+s)2
4s
+ δσ
4
−K,
πC2 = δ
(r+s)2
4s
+
√
δσK − 2K,
πC3 = δ
(
r + s−sρ−s
√
K
δσ
)(√
K
δσ
+ ρ
)
+
√
δσK − 2K.
We need to check under which conditions πC ≥ K. We first have that
πC1 ≥ K if and only if
δ
(r+s)2
4s
+ δσ
4
> 2K ⇐⇒ K < 1
2
(
δ
(r+s)2
4s
+ δσ
4
)
.
The latter threshold is larger than δσ
4
provided that
1
2
(
δ
(r+s)2
4s
+ δσ
4
)
− δσ
4
= δ
8s
(
(r + s)2 −σs
)
> 0.
The latter condition is satisfied because of Assumptions 1 and 3; we have
indeed that s (r + s) / (2r) < (r + s)2 /s. It follows that in the space of
parameters that we consider, πC1 > K.
Next, we find that πC2 ≥ K if and only if
−3K +
√
δσ
√
K + δ (r+s)
2
4s
> 0.
33
This polynomial has one negative and one positive real root; as the polyno-
mial is positive for K = 0, we have that the condition for πC2 ≥ K is
√
K ≤ 1
6
(√
δσ +
√
δσ + 3δ (r+s)
2
s
)
or equivalently
K ≤ δσ
36
(
1 +
√
1 + 3 (r+s)
2
σs
)2
≡ K8 (σ,ρ) .
Is the latter condition more or less stringent than K ≤ K1 (σ,ρ)? We
compute
K1 > K8 ⇔ r+s2s −ρ >
1
6
(
1 +
√
1 + 3 (r+s)
2
σs
)
⇔ σ > s(r+s)
2
(3r+s−6sρ)(r+s−2sρ) = σ1 (ρ) .
Whether σ1 (ρ) is above or below s (r + s) / (2r) depends on the value of ρ.
It can be checked that σ1 (ρ) increases with ρ and σ1 (0) =
s(r+s)
3r+s
< s(r+s)
2r
while σ1
(
r
2s
)
= (r+s)
2
s
>
s(r+s)
2r
. The exact cutoff value is 0 < ρ̂ < r 2s
, with
ρ̂ =
3r + 2s−
√
6r2 + 6rs + s2
6s
.
Finally, we find that πC3 ≥ K if and only if
δ
(
r + s−sρ−s
√
K
δσ
)(√
K
δσ
+ ρ
)
+
√
δσK ≥ 3K.
Developing this inequality, we find that it is equivalent to
K < δσ
(
(r+s(1−2ρ)+σ)+
√
−12sσρ2+4σ(3r+2s)ρ+(r+s+σ)2
2(s+3σ)
)2
= K9 (σ,ρ) .
Unsurprisingly, we find that K9 > K1 for σ < σ1 (ρ). We have thus that K8 (σ,ρ) and K9 (σ,ρ) constitute the two branches of K4 (σ,ρ) as described in the text.
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For managers, supervisors, team leaders and team members
who would like to learn better ways to
motivate … inspire … lead … succeed!
LEADERSHIP
DEVELOPMENT
& TEAMBUILDING
“To be a leader for the next century, you have
to be able to bring out the best in people.”
— Patricia Aburdene, The Leader’s Companion
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The Conference on
Leadership and
teambuilding
tools, techniques
and strategies
2
AND SO cAN yOU.
Like most managers, though, you and your company could use these practical
leadership skills now, rather than spending months, even years learning and
perfecting them through the time-consuming and sometimes painful
trial-and-error method. That’s why we pulled together the collective
knowledge of teambuilding experts and dynamic, accomplished leaders,
distilling mountains of information, tips, shortcuts and techniques down to
an exciting one-day conference with 2 separate tracks so you can tailor the
day to fit your exact needs.
This Leadership Development and Teambuilding Conference is full of real-life
examples, practical methods and techniques—every one of the 10 sessions is
packed with ideas and tips that you can put to work immediately to improve
your job and your skills. So whether you’re an experienced leader looking for
new ways to motivate your team, or you’re a supervisor or manager wanting
to build your leadership role—this groundbreaking conference is for you.
Are you a natural-born leader?
Not likely, but don’t worry, you’re not alone. The top leaders of America’s
most successful businesses aren’t either. Instead, they made the journey
from manager to leader by making the most of their innate talents,
seeking out and learning the skills they needed, and developing their
leadership abilities. They learned new ways to influence, convince and
motivate people. They conquered problems and setbacks that would have
sunk others. And, through trial-and-error experience and professional
development, they learned how to create and inspire powerful teams that
became much more than the sum of the individuals on those teams.
conference Agenda
8:15 – 8:50 a.m. Registration
Opening session
9:00 – 9:
3
5 a.m. The real-life stories behind famous teams … how to turn obstacles into success
9:35 – 9:50 a.m. Break
TRAck 1
taking charge of Your
Job as a leader
TRAck 2
inspiring teams to achieve
challenging Goals
Session 1
9:50 – 10:40 a.m.
Developing the leader within you Light the fire of excellence in your team
10:40 – 10:55 a.m. Break
Session 2
10:55 – 11:45 a.m.
30 tips for becoming an inspired leader Speak so others know how to follow
11:45 a.m. – 1:00 p.m. Lunch (on your own)
Session 3
1:00 – 1:50 p.m.
It all starts with YOU:
Discover your team player style Positive feedback … the fuel of high performance
1:50 – 2:05 p.m. Break
Session
4
2:05 – 2:55 p.m.
Building a team that’s a reflection of you A team approach to dealing with unacceptable behavior
2:55 – 3:10 p.m. Break
Session 5
3:10 – 4:00 p.m.
Leadership mistakes you don’t have to make What teams really need from their leaders
The motivating opening
session will help prepare
you for all that’s to follow.
Design your day to
meet your unique needs.
We’ve packed a lot of
information into just
one day … so feel free
to move in and out of
these two tracks and
10 dynamic sessions.
It’s your conference—
don’t miss a thing!
to enroll,
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TRAck 1
taking charge of Your Job as a leader
Session 1: 9:50 – 10:40 a.m.
Developing the leader within you
Leaders who are able to look inside and see their true natural strengths
are rare. But we all have areas in which we excel—you included! So
why not use them to your advantage? In this session, you’ll uncover new
competencies you didn’t know you possessed … find out how to build on
these inner potentials … and boost your confidence in everything you do.
• How to acquire the skills of a “born leader”
• The amazing facts behind why some of the most successful men
and women succeed
• A refreshing definition of “leadership” that boils your job down to
one simple task
• 7 facts you must know before you can really lead
• How to discover and tap into your inner strengths
Session 2: 10:55 – 11:45 a.m.
30 tips for becoming an inspired leader
Being a leader is tough. You need all the help you can get. Not just
long-term—but now. This fast-paced session delivers 30 rapid-fire tips
for honing skills like communicating, motivating and managing your
time—the essential building blocks of superior leadership. Take one tip
a day, practice it and by the end of the month all 30 will be ingrained in
your day-to-day life. Sample tips:
• Got a meeting tomorrow? How to use it as an opportunity to shine
• Brush up on your ability to sell your ideas—on your way home tonight
• Leaders “get it done”—how to improve in that area immediately
• What is “leadership” communication? Conduct a quick check to see
if you’re on track
• 3 things you can do right now to keep your best people around
Session 3: 1:00 – 1:50 p.m.
It all starts with yOU: Discover your
team player style
Surprisingly, being aware of how you function on a team is an important
factor in how your team functions. By being aware of your unique team
player style, you can consciously bring personalities on board who build
on your strengths—and shore up your weaknesses. This session is the
fastest way to identify and make sense of your team behavior—how you
contribute to meetings, deal with conflict, respond to stress and more—
and what it means to you and your team.
• The various roles team members play: Where do you fit in?
• Recognizing the strengths and trouble spots of your unique
team player style
• How to avoid team conflict by mixing and matching work styles
• Work style differences—why is this such a big deal?
• Why the best team leaders are also strong team players
Session 4: 2:05 – 2:55 p.m.
Building a team that’s a reflection of you
A team is not a coincidence. It is a telling mirror image of the leader who
formed it. What about your team? Does it reflect your vision? Focus?
Principles? Are your employees committed, focused, driven—like you? This
session will help you understand the power of influence and change you
possess as a team leader to create a “reflection” you can be proud of.
• The litmus test: Would your team members encourage their colleagues
to come on board?
• How your team is a reflection of you—and why that matters
• Simple things you can do every day to build a stronger team
• Good team, bad team: How you make the difference
• 5 secrets to becoming the team leader everyone wants to work for
Session 5: 3:10 – 4:00 p.m.
Leadership mistakes you don’t have to make
No matter how great leaders are (or think they are), they are going to
make mistakes. It’s human nature. But you can learn from them—and
that’s the point of this session. Join us as we take an armchair look at
mistakes leaders commonly make—often without even realizing it. Learn
what to look out for to avoid potential missteps that can damage your
relationships and erode the respect and confidence your team, upper
management—everyone—has in you.
• Lessons learned from 3 poor leadership decisions that made
national headlines
• 4 mistakes so common they have become “accepted leadership styles”
• Attitudes of leaders that can turn into real traps
• Confronting people and problems—how not doing this can mess up your
company and your future
• 5 habits that may seem like a good idea—but can become barriers to
your success later
on-site training and
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We can deliver this conference right to your company’s door or provide
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your organization’s training goals. Or let our staff of professional
trainers add sparkle to your next corporate or association meeting
with a stimulating keynote speech designed just for you. Whether you
have 3 or 300 people to train, SkillPath is the answer. For complete
details and a no-obligation quote, call 1-800-873-7545 and ask for
the on-site training department.
to enroll, call toll free 1-800-873-7545
or on-line at www.skillpath.com
3
TRAck 2
inspiring teams to achieve challenging Goals
Session 1: 9:50 – 10:40 a.m.
Light the fire of excellence in your team
You are to be congratulated! You’ve formed your team, set goals and
everyone’s “clicked.” Now you’re ready to start the rewarding process
of fine-tuning your team to reach the highest level of performance. We
talked to countless leaders who’ve taken their teams to that enviably
elevated position. And we’ve distilled their invaluable insight into a few
pure and simple principles you can use to help get the results you want.
• 101 low-cost ways to motivate and reward employees (and a few more
that are absolutely free!)
• How to detect when members are ready for new challenges
• How to seek and get your team’s participation in shaping a new vision
• 4 key areas to focus on as you move your team forward
• The importance of a well-thought-out communication strategy in getting
your team from point A to point B
Session 2: 10:55 – 11:45 a.m.
Speak so others know how to follow
Your success as a team leader is measured by your ability to lead people where
they need to go. But your team must get clear direction from you … not only
in meetings, but one on one as well. In this session, you’ll learn refreshingly
simple communication strategies that will help you sidestep damaging
misinformation … build trust … even become a role model for those you lead.
• Communicating as a leader and as a manager are not the same … here’s
insight into the important difference and how you can master both
• Practice the powerful Law of Connection that great leaders instinctively
know and honor
• How to find out if your message is understood … and if it’s being acted
on correctly
• Who employees really listen to in meetings and why
Session 3: 1:00 – 1:50 p.m.
Positive feedback … the fuel of
high performance
The wise leader knows that every team member needs feedback, especially
when painful mistakes occur. But it’s easy to overlook this powerful
motivational weapon in the rush of everyday business. Here you’ll learn
how to provide specific, sincere feedback to prevent future errors, gain
commitment and strengthen performance.
• How to tap into a motivating, multidimensional team approach to feedback
• How to turn successes and failures into “training moments”
• How to focus on the process, not the person, when giving
constructive criticism
• Do’s and don’ts when giving feedback that builds … not destroys
• When to recognize individual contributions and how … without turning
off other team members
4
We guarantee
results!
If you’re not happy, we’re not happy. Go back to work and apply
what you learned at the conference. If you’re not absolutely
delighted with the results you achieve, write to us right away. We’ll
issue you a refund or arrange for you to attend another SkillPath
program without paying another penny. That’s our guarantee!
Session 4: 2:05 – 2:55 p.m.
A team approach to dealing with
unacceptable behavior
Most managers have learned to use traditional disciplinary procedures to
address poor performance, negative attitudes and other problem behavior. But
as a team leader, you have an even more effective way to deal with unacceptable
behavior … peer pressure. It can do wonders in getting others to pull their own
weight. Attend this session and explore the many appropriate ways your team
can effectively handle their own “family” problems.
• How to use the team approach to eliminating unacceptable
behavior and performance
• Dealing with bad attitudes and “quiet resistance” that can doom
your team’s effectiveness
• How to coach your team in the sensitivities of confronting each
other about problems
• Why traditional disciplinary processes don’t do the job in a
team environment
• Should you remove a team member when others complain? Here’s
how to solve this serious problem
Session 5: 3:10 – 4:00 p.m.
What teams really need from their leaders
As your team moves through the stages of development to maturity, your
responsibilities as a team leader will naturally change. Depending on the
day and the situation, your team may need you to provide guidance, serve
as a sounding board, run interference or add a little muscle to get the job
done. In this session, you’ll explore the many and varied tools you’ll need to
successfully shift from one role to another as your team requires.
• How to fulfill your team’s ongoing need for direction and vision
• Your never-ending responsibility to make sure all your team’s needs are
met … whatever they are
• How to develop a sixth sense about when to prod … when to coax …
and when to do nothing at all
• What teams really need from their leaders
to enroll, call toll free 1-800-873-7545
or on-line at www.skillpath.com
✁
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CONCTS #02111
V3
A
The Conference on
The State of
Technology
Product
Management
John Milburn
jmilburn@pragmaticmarketing.com
About Pragmatic
Marketing
� Experts in technology product management and
product marketing
� Specialize in training and consulting
� Trained tens of thousands of people at
thousands of companies since 199
3
2
3
Pragmatic Marketing Framework™
S
T
R
A
T
E
G
Y
E
X
E
C
U
T
IO
N
The market-drive
n
model for managing
and marketing
technology products
Format for Tonight
4
� I’ll present 4 of today’s common problem areas for
Technology Product Management
� I’ll share some examples of companies (without their
names�..) that are experiencing them
� I’ll propose some approaches and conclusions
� We’ll open it up for discussion
� 4. For as long as I have material, -or- we run out of
time4..
Common Problem Areas
5
1. Project/Customer vs.
Product/Market
2. “Solutions” vs.
Products
3. Infrastructure Management vs.
Product
Management
4. Waterfall Management with
Agile Development
6
Project/Customer vs.
Product/
Market
Only build solutions for
problems that are urgent,
pervasive and that the
market will pay to solve.
7
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Customers (n=1)
9
Michael Treacy & Fred Wiersema
Discipline of Market Leaders
10
11
Large “Big Data” firm recently acquired by an
Equity Investment Firm
Automobile/travel software company
Startup networking services provider
Federal hardware provider
12
RECOGNITION of
� Corporate trends and/or objectives
� Market differentiation may be your N=1 capabilities
It is very hard for a single PM to be both project/near
term revenue driven and product/strategic driven
Longer term value will be created with produc
ts
� The value of a project company are the people and the
contracts (Value “multiplier” is close to 1)
� The value of a product company is the repeatable revenue
streams (Value “multiplier” can be 10-20x)
13
“Solutions” vs.
Products
14
S
T
R
A
T
E
G
Y
E
X
E
C
U
T
IO
N
Market
Problems
S
T
R
A
T
E
G
Y
E
X
E
C
U
T
IO
N
15
What Market
Problems does
your
“Solution”
solve?
Market
problems
Product
#1
Product #2
Product #3
Product #1 Product #3Product #2
Infrastructure
“Solution”
16
Solutions
Product
B
u
sin
e
ss
P
la
n
Product
P
o
sitio
n
in
g
B
u
y
in
g
P
ro
ce
ss
R
e
q
u
ire
m
e
n
ts
M
a
rk
e
tin
g
P
la
n
Product
Business Plan Positioning Buying Process Requirements Marketing Plan
B
u
sin
e
ss P
la
n
P
o
sitio
n
in
g
B
u
y
in
g
P
ro
ce
ss
R
e
q
u
ire
m
e
n
ts
M
a
rk
e
tin
g
P
la
n
B
u
sin
e
ss P
la
n
P
o
sitio
n
in
g
B
u
y
in
g
P
ro
ce
ss
R
e
q
u
ire
m
e
n
ts
M
a
rk
e
tin
g
P
la
n
Infrastructure
Business Plan Positioning Buying Process Requirements Marketing
Plan
17
$2B technology parts provider
International travel services provider
18
Solutions Management (aka Portfolio, Product Line) is
not a part time role
� Should not just be the Director of PM
� Should be defined by the Market, not the Technology
Solutions must be based on, and explicit about what
“Outside in” Market Problems they solve
Biggest issue is the “Governance Model” – who wins
when there is a conflict
19
Infrastructure
Management vs.
Product
Management
20
Solutions
Product
B
u
sin
e
ss P
la
n
Product
P
o
sitio
n
in
g
B
u
y
in
g
P
ro
ce
ss
R
e
q
u
ire
m
e
n
ts
M
a
rk
e
tin
g
P
la
n
Product
Business Plan Positioning Buying Process Requirements Marketing Plan
B
u
sin
e
ss P
la
n
P
o
sitio
n
in
g
B
u
y
in
g
P
ro
ce
ss
R
e
q
u
ire
m
e
n
ts
M
a
rk
e
tin
g
P
la
n
B
u
sin
e
ss P
la
n
P
o
sitio
n
in
g
B
u
y
in
g
P
ro
ce
ss
R
e
q
u
ire
m
e
n
ts
M
a
rk
e
tin
g
P
la
n
Infrastructure
Business Plan Positioning Buying Process Requirements Marketing Plan
21
Large Midwest healthcare software firm
� Director of Applications
� Director of Infrastructure
Large systems vendor
� Public Cloud offering
22
For infrastructure management, it may be better to
have only a Product Owner (a’la Agile), and not a
Product Manager
� Business Plan will always be negative; Marketing is minimal
� Someone needs to overlay Development and interface with
the other groups
Infrastructure funding justification should come from
the Solution ~or~ for Cost Savings/Internal Efficiency
One “process” does not fit all projects
23
Waterfall Management
with
Agile Development
24
Product
Roadmap
Build /
Test
System
Test
Business
Plan
Business
Gate
Waterfall
Planning
LAUNCH
Release
Gate
Marketing
Plan
Launch
Plan
Master Requirements List
Goals / Themes
Requirements
Project
Plan
Design
Spec
Start
Gate
Market Requirements Document
Market Requirements Table
25
Product
Roadmap
Build / Test
System
Test
Business
Plan
Business
Gate
Waterfall Planning – Accountability
LAUNCH
Release
Gate
Marketing
Plan
Launch
Plan
Master Requirements List
Goals / Themes
Requirements
Project
Plan
Design
Spec
Start
Gate
Market Requirements Document
Market Requirements Table
— Product Manager
— Development
— Product Marketing Manager
26
Product
Roadmap
Business
Plan
Business
Gate
Agile Planning
Marketing
Plan
Launch
Plan
Product Backlog
Release Backlog
User Stories
Overall Project
Plan
Arch /Design
Start
Gate(s)
Release
Gate
LAUNCH
System
Test
Sprint Backlogs
Build(s)
Sprint
Test(s)
Sprint
Plan(s)
Demo(s)
Burnups /
Burndwns
27
Product
Roadmap
Business
Plan
Business
Gate
Agile Planning – Accountability
Marketing
Plan
Launch
Plan
Product Backlog
Release Backlog
User Stories
Overall Project
Plan
Arch /Design
Start
Gate(s)
Sprint Backlogs
Build(s)
Sprint
Test(s)
Sprint
Plan(s)
Demo(s)
Release
Gate
LAUNCH
System
Test
— Product Manager
— Product Owner
— Development
— Product Marketing Manager
Burnups /
Burndwns
28
Innovation
Competitive
Landscape
Technology
Assessment
Lead
Generation
Thought
Leadership
Referrals &
References
Launch
Plan
Use
Scenarios
Requirements
Status
Dashboard
Product
Roadmap
Presentations
& Demos
Event
Support
“Special”
Calls
Channel
Support
Channel
Training
Sales
Process
Collateral
Sales
Tools
BusinessMarket ProgramsPlanningStrategy SupportReadiness
S
tr
a
te
g
ic Ta
ctica
l
BusinessMarket ProgramsPlanningStrategy SupportReadiness
S
tr
a
te
g
ic Ta
ctica
l
Pragmatic Marketing Framework™
Marketing
Strategy
Technical
29
Innovation
Competitive
Landscape
Technology
Assessment
Lead
Generation
Thought
Leadership
Referrals &
References
Launch
Plan
Use
Scenarios
Requirements
Status
Dashboard
Product
Roadmap
Presentations
& Demos
Event
Support
“Special”
Calls
Channel
Support
Channel
Training
Sales
Process
Collateral
Sales
Tools
BusinessMarket ProgramsPlanningStrategy SupportReadiness
S
tr
a
te
g
ic Ta
ctica
l
BusinessMarket ProgramsPlanningStrategy SupportReadiness
S
tr
a
te
g
ic Ta
ctica
l
Pragmatic Marketing Framework™
User
Acceptance?
Always
Available?
User Stories?
Use Cases?
UI
Design?
Functional
Design?
Iteration
Planning
30
Management demands a Business Plan, even for Agile
projects
But, management must be willing to accept that
there are unknowns (else we pad #’s and just lie…)
It is healthy to kill an occasional project after it has
already been funded and started
Clarity and staffing of Roles (PM, PO, PMM) is
causing more of a void in Market Sensing activities
Thanks !
jmilburn@pragmaticmarketing.com
