Crowdfunding, a new generation investment and funding system based on small donations from a large number of individuals, is a partnership model that has emerged as a new option for companies seeking financing, particularly in the United States and European countries such as Germany and the United Kingdom.
In this system, individuals make donations, purchase small shares, or make payments in exchange for the first products to be produced through the internet.
Crowdfunding, also known as distributed capital or crowd funding, has become increasingly popular in recent years and offers new options for companies in search of funding. Simply put, it involves multiple small investors coming together to invest in a project they choose, sometimes expecting a symbolic return, or providing capital to entrepreneurs by pre-ordering products or making a type of donation during the product development stage.
Crowdfunding models can be categorized into two main types: those with financial returns and those without financial returns.
Crowdfunding Models with Financial Returns
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Equity-Based Crowdfunding: This method involves companies seeking financing by selling shares of the company through licensed platforms regulated by the Capital Markets Board (SPK) and increasing their capital through investments from the crowd. The legal preparation for this model has been completed in Turkey, and the relevant regulations have been published.
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Debt-Based Crowdfunding: This model allows projects seeking financing to raise funds by borrowing from investors, similar to issuing bonds. The legal preparation for this model is still ongoing in Turkey.
The Capital Markets Board published the “EQUITY-BASED CROWDFUNDING REGULATION” for equity-based crowdfunding on October 3, 2019.
The first application to act as a platform for crowdfunding campaigns was made by fonbulucu.com on August 14, 2020. The application made by fonbulucu.com to obtain regulatory approval from the Capital Markets Board was approved on April 8, 2021, and it was listed in the SPK’s records.
According to the regulation, while platforms facilitate crowdfunding campaigns, Takasbank provides custody services for the funds raised and the Central Registry Agency registers and holds shares on behalf of investors. Investors create an investor record through the fonbulucu.com platform and open a crowdfunding investor record in the Central Registry Agency through e-government integration (Turkiye.gov.tr).
Turkey’s first equity-based crowdfunding campaign was initiated by Promoseed, a biotechnology startup, on May 11, 2021. Although the startup aimed to raise 250,000.00 TL in funding, it received requests for 1.7 times the amount (416,921.00 TL) from 291 investors within 10 days, successfully completing the campaign.
Crowdfunding Models without Financial Returns
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Donation-Based Crowdfunding: In this model, funds are collected from the crowd through a donation process without any financial return.
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Reward-Based Crowdfunding: Companies seeking financing offer their products for pre-order in exchange for crowdfunding from the crowd. Platforms do not have legal obligations for reward and donation-based crowdfunding campaigns.
Some local examples of platforms offering reward and donation-based crowdfunding include Fonbulucu, Arıkovanı, Fongogo, Crowdfon, and Fonlabeni.
In this method, the necessary funds for investment are acquired from a large group of people or, particularly, an online community. Each contributor makes a small contribution to the collective effort. Crowdfunding, as a method, represents a way to engage external resources through the participation of many unrelated individuals rather than relying on a specific person’s or group’s investment.
In the United States, websites and companies that support such initiatives include ArtistShare, ChipIn (2005), EquityNet (2005), Pledgie (2006), Sellaband (2006), IndieGoGo (2008), GiveForward (2008), FundRazr (2009), Kickstarter (2009), RocketHub (2009), Fundly (2009), GoFundMe (2010), Appsplit (2010), Microventures (2010), and Fundageek (2011).
Crowdfunding shares similarities with the traditional Turkish concept of “İmece,” which is based on community collaboration and mutual assistance in rural areas. In “İmece,” tasks are completed voluntarily or by necessity, and everyone is obligated to contribute labor and sometimes financial resources to address the needs and issues within the community.
Some examples of tasks that can be accomplished through “İmece” include constructing sewage systems, cleaning communal pastures, setting up wedding venues, building schools, constructing mosques, gathering fuel for schools, cutting down trees in the village forest, cleaning the village oven, and participating in communal work for charitable causes or to fulfill common needs.
In cases where financial contributions are required, a decision to collect funds, known as “Salma,” is made by the village headman and council of elders.
Modern concepts similar to “İmece” have developed in contemporary life:
- Crowdsourcing: Involves obtaining a ready-made solution, creating it, or having it created by someone (or some people) when it is not possible to do it oneself or by experts. For example, Wikipedia and Linux.
- Crowdfunding: A method that is resorted to when no investor expresses interest in a proposed investment. It involves attracting donations or contributions from the crowd, sometimes in exchange for shares or early access to the product.
For crowdfunding platforms authorized to operate, please refer to the list provided by the Capital Markets Board here: [Include the link to the list].
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