An independent movie producer with a modest but loyal fan base is short of funds for her next movie. Knowing that a bank loan is an unrealistic option, she is considering crowdfunding. But she is not very familiar with it or how to go about starting and conducting a crowdfunding campaign. Prepare a report for the producer explaining the different approaches to crowdfunding, including the equity funding approach. Alert the producer to any drawbacks that might make people less willing to contribute to funding her movie and positives that might make people more likely to fund her movie. Conclude your report with a recommendation of which crowdfunding approach you believe would be most effective for this independent movie producer. As part of your preparation for your report, view the article from the text (pp. 269-270): Is It Safe to Invest Through Crowd-funding? Follow the report format outlined below: -Describe and define crowdfunding (sometimes shown as crowd funding). But sure to include the different approaches to crowdfunding, including equity funding. -What are the advantages to the movie producer? -What are the advantages and disadvantages to the potential funder? Include such concepts as asymmetric information and investment risk. -Recommend one approach that would be most appropriate for this producer and remember to include the reasons why you selected it. -Remember that citations go into the body of the report and the references go at the end of the report. Both are required. Case Studies follow the following general format: •An Introduction where you explain the situation and the decision(s) facing the firm. Most, if not all, of this information will be in the case. •Alternatives: here you define terms as needed and identify the alternative available to the firm. •Evaluate the alternatives: discuss the advantages and disadvantages of each of the relevant alternatives. •Recommendation and conclusion: select one of the alternatives as your recommendation. Support your recommendation with information used in your case analysis. Provide specific and detailed recommendations. •Use additional resources as needed, but remember to cite and reference them properly using APA style. Note: For a short case such as this one, the Alternatives discussion can be combined with the Evaluation discussion as single section of your case. Be sure to include APA formatted citations and references. Citations in the body of your case and references are required.
Crowd funding is the approach in which the funds are raised by monetary contribution from a huge amount of people mostly through internet. It is the tool to raise funds which is beyond the general tools of raising funds. There are different types of crowd funding available such as reward based, debt based, litigation, charity and equity. In reward base system, there are two types of methods such as keep it all and all or nothing. In Keep it All method the entrepreneurs set a fund raising goal and keeps the full amount of money with them whether the goal is achieved or not but in the other method they only kept money with them if the specific goal is achieved for which the fund was raised. In equity financing different individual supports the efforts of other organization on the collective basis by providing the finance. In debt based the borrowers apply online general for free and their applications are evaluated by some software deployed at platforms through which there credit worthiness and interest rate are also identified. In litigation method the investors invest in legal cases and get the money if the cases get success. Last but not least, the charitable method includes the efforts of the individual basis on the collective basis to support charitable causes. There could be different positive and negative elements which might affect the producer by raising the funds via crowd funding. The positive issues could be that the people who are interested in the concept of the movie and those who are real fans will give their money to the producer. Another benefit the product could have is if he uses the reward base system to raise fund then he can set the percentage to be given to those who will invest the money if the movies got hit. Negative issues he might face includes that it will take much time to generate so huge funds through this type of techniques. Those who are not fans and do not trust the producer will not give their money to support as well as other methods such as charity and litigation could not be used by the producer because the movies is not legal neither it contains any charitable causes. The advantage to the movie producer will be that he will not have to pay any interest payments if he uses the methods of crowd funding except the debt funding. The dis-advantage to the investor could be that he might lose his money if the goal is not achieved or the loss of extra money which he could get if the movie gets success.
All the methods are the good enough according to their qualities and selection of the method depends on the need of the fund raiser. For the producer the reward base system is the most appropriate way to raise the funds for the movie because in it there are several benefits exists for him. Firstly, he will not have to pay any interest payments unlike debt method. Secondly, he can leverage the investor to attract more funds by putting incentive like the share in the profit if the movie goes hit, etc.
Entrepreneur [September, 2015]. Crowd Funding. Retrieved from http://www.entrepreneur.com/article/228125