Can Crowdfunding Platforms Participate in Their Own Offerings?

A common question often arises in the realm of crowdfunding: Can and should crowdfunding platforms participate in the offerings they facilitate? This article explores the reasons and implications of such participation, specifically focusing on the different categories of crowdfunding platforms—perk-based, equity-based, and revenue share-based.

Types of Crowdfunding Platforms

There are primarily three main categories of crowdfunding platforms:

Perk-based crowdfunding: Examples include Kickstarter and Indiegogo. These platforms allow individuals to support projects in exchange for rewards or perks. Equity-based crowdfunding: Examples include Symbid and Seedrs. These platforms enable investors to invest money in exchange for equity shares in the funded projects. Revenue share-based crowdfunding: Examples include SellanApp and Bolstr. These platforms involve a portion of the revenue generated from the sale of products or services.

Why Yes, They Can and Do Participate

1. Internal Use and Personal Investment: Kickstarter is a prime example of a platform where internal staff often personally invest in projects they believe in. Kickstarter often highlights such projects in its newsletters, fostering a sense of insider support. The logic is simple: if employees believe in a project, they will likely promote it more effectively within the platform.
Participation does not have to be significant or extensive. Many platforms see participation happening on a small scale, with one to ten products purchased for internal use or by employees. These purchases may not be for resale on the open market but as a means to support projects aligned with the company's values or interests.

2. Strategic Alignment and Motivation: When a crowdfunding platform participates in a funding round judged to be a good investment, it aligns intra-platform interests with external stakeholders. This can create a motivated workforce or community.
From a strategic perspective, platforms often fund projects they believe have high potential. This can be seen in the involvement of platforms in startup accelerators or incubators. While the scale is smaller, the impact can be significant. Such participation can also inspire other users or companies to invest, contributing to the platform's success and self-fulfilling prophecy.

3. Financial Incentive and Success Sharing: For platforms like SellanApp, taking an active role in the projects they promote is both a financial and strategic decision. They often take a small stake in each project to cover maintenance costs and to share in the success. By doing so, they incentivize project owners to deliver the best product possible, which ultimately benefits the platform itself.
Public disclosure is key; when a platform is participating in a project, this information is typically included in the terms of use or the 'About' page. Knowing this, users can make informed decisions based on the platform's stake, thereby fostering trust and engagement.

Conclusion:
In summary, crowdfunding platforms can and do participate in their own offerings. This can be driven by internal needs, strategic alignment, or revenue sharing. While the exact level of participation may vary, the practice is not uncommon and can be both beneficial and legal. Understanding the diverse nature of these platforms and their potential motivations is crucial for investors, users, and stakeholders alike.