Question 1

As discussed in the text,Crowdfunder,AngelList,Fundable,and Circle Up are examples of sites that ______.

Accepted Answer

Crowdfunder, AngelList, Fundable, and Circle Up are examples of equity crowdfunding sites, which allow backers to invest in exchange for ownership or future returns. They typically cater to startups and small businesses seeking funding amounts between $100,000 to $5 million.

Question 2

Which of the following needs can be addressed primarily through crowdsourcing?

Accepted Answer

Crowdsourcing is a useful tool for addressing needs that involve gathering information, data, or creative resources from a large number of people. In this case, the company wants to procure a library of freely downloadable photographs, which can be easily crowdsourced from a community of photography enthusiasts or even the general public. The other options involve more specific business decisions or internal processes that may not be as suitable for crowdsourcing.

Question 3

What is characteristic of the reward model of crowdfunders?

Accepted Answer

The reward model of crowdfunding involves investors receiving prizes for their financial support, such as product samples or experiences. This model does not involve equity exchange or treating funds as loans, and there may not be an expectation of direct return on investment.

Question 4

What is characteristic of the patronage model of crowdfunders?

Accepted Answer

The patronage model of crowdfunding is characterized by investors providing financial support without expecting a direct return. This model is often used in the arts, where supporters donate money to help an artist or project they believe in, without expecting a financial return.

Question 5

The most established crowdfunding site is ______.

Accepted Answer

Kickstarter is the most established crowdfunding site, having been founded in 2009 and generating over $5 billion in pledges from over 19 million backers. Indiegogo and Crowdrise are also popular crowdfunding sites, but Kickstarter has the most longevity and success. Tilt is no longer in operation, so it is not a relevant choice.

Question 6

What is characteristic of the lending model of crowdfunders?

Accepted Answer

The lending model of crowdfunders is characterized by treating funds provided by investors as loans. This means that investors expect to receive their contributed funds back with interest over a specified timeline.

Question 7

What is the most effective reward to offer to Kickstarter contributors?

Accepted Answer

Promising contributors that they will be the first to receive the product, along with a contribution award, is a good incentive for them to contribute as they would be among the first to experience the product. Additionally, the contribution award would make them feel appreciated and valued. Cash award and awards-in-kind may not be as effective as they lack the emotional connection and personal touch that the first-to-receive reward offers. Offering to list the person as a founding contributor on all product and service literature may not be as enticing as the first-to-receive reward.

Question 8

According to the 2012 American Dream Composite Index,______ tend to be between the ages of 24 and 35,are more likely to be men,and to have an income of over $100,000 per year.

Accepted Answer

The answer of According to the 2012 American Dream Composite...

Question 9

How much money can be raised through crowdfunding?

Accepted Answer

Crowdfunding can raise amounts ranging from small to large, from a few thousand dollars to even millions of dollars depending on the project or campaign. Some successful crowdfunding campaigns have raised over $10 million.

Question 10

How does Kickstarter get its money?

Accepted Answer

Kickstarter gets its money by charging a percentage of the funds obtained from each successful project. They take 5% of the total funds raised and also charge credit card processing fees.

Question 11

What is characteristic of the investor model of crowdfunders?

Accepted Answer

The characteristic of the investor model of crowdfunders is that equity is exchanged for the contribution. In this model, investors provide financial support with the expectation of a return on their investment in the form of equity in the company or project they are funding. This is different from other models where funds are treated as donations or loans with no expectation of direct return. Therefore, the correct answer is C.

Question 12

According to the text,small companies and individuals may choose to manufacture prototypes in China because Chinese factories can manufacture in ______ batches at ______ costs.

Accepted Answer

The text states that small companies and individuals may choose to manufacture prototypes in China because Chinese factories can manufacture in small batches at low costs.

Question 13

Crowdfunding can help you save money on marketing because it provides ______.

Accepted Answer

Crowdfunding allows you to gauge interest in your product before you fully invest in marketing efforts. This can save you money by ensuring that you are targeting a market that is likely to be interested in your product.

Question 14

Which of the following could not be offered in a Kickstarter campaign?

Accepted Answer

Kickstarter explicitly prohibits offering raffles or lotteries as rewards in a campaign, as this could be considered gambling and is not compliant with their policies. The other options listed are all common rewards offered in Kickstarter campaigns.

Question 15

Users of the popular GPS app Waze periodically report driving conditions while on the road,allowing all users to benefit from live traffic updates.Waze is an example of crowdsourcing because ______.

Accepted Answer

Crowdsourcing involves obtaining information or input from a large group of people, usually through an open call for contributions. In the case of Waze, users freely contribute traffic information while using the app, allowing all users to benefit from the latest live traffic updates.

Question 16

How does equity crowdfunding differ from other types of crowdfunding?

Accepted Answer

Equity crowdfunding allows investors to become shareholders of the company, while other types of crowdfunding do not offer this option. Choice B is incorrect because angel and venture capitalists are not considered part of a crowdfunding community. Choice C is incorrect because funds from equity crowdfunding are not provided by the government. Choice D is incorrect because financial institutions are not typically allowed to participate in equity crowdfunding.

Question 17

What made equity crowdfunding in the United States possible?

Accepted Answer

Equity crowdfunding in the United States became possible due to the passing of the JOBS Act in 2012, which relaxed regulations and allowed for crowdfunding of securities. None of the other options mentioned had a significant impact or connection to the establishment of equity crowdfunding in the US.

Question 18

What must be offered by someone who uses Kickstarter for a fundraising project?

Accepted Answer

Kickstarter is a crowdfunding platform where people can showcase their creative projects and fundraise from people all over the world. In order to attract backers, project creators must offer something tangible in return. This could be a product, service, or even a creative experience. Without offering something to backers, it is unlikely that the project will be successful on Kickstarter.

Question 19

What happens on Kickstarter if the funds are not raised in the given amount of time?

Accepted Answer

If the funds are not raised in the given amount of time, the project fails and the money is not earned. No money will be received by the project owner.

Question 20

What happens if the funds raised on Kickstarter exceed those specified at the start of the project?

Accepted Answer

The owner of the project can keep the excess funds. Kickstarter does not limit the amount that can be raised after the initial goal has been met. However, the owner of the project is responsible for fulfilling any promises made to backers and using the additional funds appropriately.

Quiz 12: Bootstrapping and Crowdfunding for Resources