Crowdfunding: Disintermediated Investment Banking

22 Pages Posted: 10 Jun 2011 Last revised: 2 Nov 2014

Brian J. Rubinton

McGill University

Date Written: April 11, 2011

Abstract

This paper introduces crowdfunding as a concept and model for the evolution of investment banking. Crowdfunding, an application of crowdsourcing, is defined as one party’s attempt to finance a project by offering three types of investment opportunities to potential investors. The investment opportunities are donations, passive investments, and active investments. From this foundation I develop a model in which interdependent agents operate in a dynamic, discrete setting. Potential investors decide whether or not to invest in one of three opportunities each period while the entrepreneur sets the parameters of the game to maximize the probability of successful financing. I then simulate the model to analyze the effects changes in key parameters have on the results of the game.

Keywords: Crowdfunding, Crowd, Funding, Financing, Financial, Crowdsourcing, Network, Finance, Bank, Banking, Relationship, Evolution, Investment, Commercial, Customer, Participation, Primary, Markets

JEL Classification: G24, G32, L26, O30, P34

Suggested Citation

Rubinton, Brian J., Crowdfunding: Disintermediated Investment Banking (April 11, 2011). Available at SSRN: https://ssrn.com/abstract=1807204 or http://dx.doi.org/10.2139/ssrn.1807204

Brian J. Rubinton (Contact Author)

McGill University ( email )

1001 Sherbrooke St. W
Montreal, Quebec H3A 1G5
Canada

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