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What is crowdfunding for Research & Innovation?

Research and innovation is defined as: the process, including its outcome, by which new ideas generate new products, services or business and organisational models that are successfully introduced into an existing market or that are able to create new markets. It encompasses not only results from research and development (R&D), but also innovation stemming from activities such as finding new uses for or combinations of existing technologies and developing new ways of interacting with users or customers.

The crowdfunding for R&I includes all the alternative finance projects whose main aim is the collection of money:

  • for scientific research,

  • for initiatives aimed at generating products and services that address new and unsatisfied market needs, and

  • for initiatives aimed at satisfying existing market needs by adopting novel combinations of services, methods and technologies.

It encompasses two types of platforms:

  • dedicated to research, science and innovation, such as sciencestarter.de

  • generic platforms which include research and innovation aspect.

The study excludes from the analysis:

  • all the CF directed primarily to artistic or cultural initiatives;

  • all the CF initiatives which do not entail a sufficiently creative or inventive attempt and

  • all the CF initiatives of personal causes and funding, whose primary benefit is individual-specific

Funding models

Types of alternative finance for R&I

The European online alternative finance market has attained a diversified growth across a wide array of funding models. They exist in pure or as a hybrid models: a mix of any of the above:

Peer-to-peer Consumer Lending
Debt-based transactions between individuals
Peer-to-peer Business Lending
Debt-based transactions between individual or institutional investors and existing businesses
Equity-based Crowdfunding
Sale of registered security by firms to investors
Reward-based Crowdfunding
Provision to backers by recipients of tangible, non-financial rewards, products or services in exchange for contributions
Donation-based Crowdfunding
No legally binding financial obligation incurred by recipients to donors: donors do not expect financial or other returns
A type of debt security, typically issued by small businesses, and often via crowdfunding platforms
Invoice trading
Firms sell invoices or receivables (debts, unsettled transactions or other monetary obligations) to individual or institutional investors at a discount to raise working capital1

Source: University of Cambridge; Ernst & Young, 2015. Moving Mainstream - The European Alternative Finance Benchmarking Report.