28
May

 

Crowfunding conference (1)

Javier Ramos, Research Associate at the University of Zurich and Complutense Institute of International Relations, addressed the MIR class on Friday 23 May in what was the last seminar of the academic year. His topic, crowdfunding, was both relevant and novel for the students.  Crowdfunding is a relatively recent phenomenon in which funds can be raised through the internet for a political, cultural, non-profit or even commercial campaign.  The three core dimensions of crowdfunding are: social networks (one can raise funds from friends and family); sector specific (the event is usually cultural); low risk (amounts donated or lent are usually quite small). This new form of financing often benefits from the “wisdom of the crowd” or the fact that, collectively, projects can become more efficient or effective. Indeed, through crowdfunding, a person may lend money to a project he/she believes in but can also give feedback on how to improve the project. This is “collective” intelligence or “efficiencracy”: efficiency through democracy.

According to Ramos, there are 4 types of crowdfunding platforms: equity based in which investors seek profits; lending based in which lenders seek interest; reward based in which one receives a reward (a book, a diploma, a gift) in exchange for a donation; and donation based in which whatever you pledge is a donation. What makes this type of financing innovative is that almost anything and everything can get financed: an end of school trip, tuition for a Phd program etc…

Of course, crowdfunding, like any new phenomenon, also presents risks and disadvantages: the risk of fraud or that you will invest your money in something uncertain, untried, untested, distant. Some critics also dislike the fact that there is no interaction or real face to face time with the person who is fundraising for a project. Perhaps, the strongest criticism is that these new internet platforms are as yet unregulated and that international law lags behind these new initiatives. In due time, laws and regulations will catch up and crowdfunding will become a transparent, efficient and democratic way to finance one’s dreams.

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