Crowdfunding also called as crowd financing, equity crowd funding, crowd equity, crowd-sourced fundraising, is an effort of raising funds from large number of individuals via Internet to support some cause or efforts initiated by other people or organizations. Crowd funding is an excellent way of supporting a wide variety of activities like disaster relief, support of artists by fans, political campaigns, Startup Company funding, free software development, inventions, scientific research, and civic projects and so on.

Simply put, crowdfunding is defined as the collection of funds through small contributions from many parties in order to finance a particular project or venture.

This whitepaper comprises the broader concept of crowd funding and its role in healthcare industry.

The process of crowd funding involves two parties the creators (individuals who request funds) and the donors (individuals who give money). In this whole process of crowd funding, the role of a donor is the most critical. The inputs of donors trigger and influence the crowd for the ultimate value of the offerings or outcomes of the process. Each donor acts as a catalyst in the process of crowd funding, motivating others to make offerings and promoting the projects in which they believe.

Motivation for participation of the donors comes with the feeling of being at least partly involved in the success of others’ initiatives, a desire for patronage or social participation, or to be a part of a philanthropic initiative, and a desire for investment, seeking a payoff in return for their contributions.

But the creators also play equally important role as the donors, as they are the ones who motivate donors in the first place and ignite various overwhelming emotions of the donors which ultimately drive them to give funds.

Understanding the motivation behind crowdfunding is critical as small individual contributions from creators and funders can lead to the formation of new companies, launching of new platforms to serve the niche areas, and fundamentally impact how we function economically and socially. Soliciting funds from the individuals is not easy. There are many crowd funding platforms such as RocketHub, Kickstarter, IndieGoGo and so on, which provide opportunities to reach out to people and motivate them to donate funds. They study the psychology of giving as why certain people make charity and how to get more individuals to do charity. Factors for making charity include emotions like sympathy and empathy, guilt, happiness and identity and through funding somebody’s campaign, vision, or idea, we get something tangible, virtual, in return.

Crowdfunding is a rapidly growing industry that focuses on providing funds to support some cause or help entrepreneurs and startup businesses to find capital for their smooth jump-start. It is a fantastic tool for a startup for receiving funds without even taking loans or paying EMIs. Investments or donations are usually made through online platforms, which then coordinate and administer the funds..

Crowdfunding works in two ways, firstly, it raises funds for the community-based projects with no financial return for the donors, purely for altruistic purpose, and secondly for some monetary gain for the donors.

There are some traditional crowd funding platforms such as ArtistShare and Kickstarter which treat funds as donations, but entrepreneurs and others eye crowdfunding as a good way of securing investments. Creators, on these platforms, own the intellectual property and give funders a “reward” in return for their donation which includes a ticket to an event, a bag of goodies, or a lunch with the creator. Funders do not become owner nor do they expect to be paid back. It attracts those who want to do some philanthropic work.

Kickstarter uses an ‘All-or-Nothing’ funding model, which means that if a funding goal is not reached, the funds are returned to the funder and the creator receives no funds. Whereas, RocketHub adopts the ‘All & More’ fundraising system, where creators can keep the money they raise even though their funding goals are not achieved. If creators reach or exceed their funding goals, RocketHub will offer an additional benefit, which is to waive the submission fees for creators’ first few projects launched. Similar to RocketHub, IndieGoGo uses the ‘keep-what-you-raise’ funding model. However, a higher fee will be charged from creators if they don’t reach the funding goals.

Crowdfunding is proving to be a lifeline in healthcare industry, especially for scientific research projects which require excessive funding. Projects those are more philanthropic than commercial, such as research on cancer treatments, and the other most deadly diseases which require extensive research for finding cures and possible treatments.

Hence, crowdfunding has revolutionized the healthcare industry, not only through funding research projects, but also in a way saving and improving the quality of lives and reaching out to those who are into dire need of getting treatments and paying their medical bills.