Crowdfinancing, as a viable means to raise capital, has proven adept at taking on different forms in order to adapt to local cultural preferences. For instance, in the United States, crowdfinancing is promoted as a democratizing instrument, allowing all investors access to the private markets from which they had been precluded for the last 80 years; however, the appeal of crowdfinacing in mainland China, which is a relative newcomer to the industry, is seen quite differently. The investment appeal of the asset class is not made as apparent. Instead, the two leading sites in China encourage the innovation and societal benefits that crowdfinancing can provide. In fact, one of the sites likened itself more to Groupon or a presale retail company, despite its inspiration from Kickstarter, rather than a crowdfinancing portal.
This corresponds with the large cultural differences between the world’s two largest economies, which has an impact on how crowdfinancing is conducted. For instance, China does not have the same donation culture as the U.S., which is a central premise of certain types of crowdfunding. Also, there are very few rules to govern this industry, which leads the main crowdfunding portal to exercise caution in promoting the industry and its projects. For example, a website may decide not to accept concepts, but rather insist that a product is a majority of the way completed before it allows for it to solicit funds through its portal. This reduces the speculative aspect of a project and appeals to the practical nature of Chinese investors. Additionally, at least one website will refund capital to every fundraiser in the event that a campaign is unable to fulfill its promises. This is attractive to Chinese investors who, in addition to the aforementioned reasons, are not content to receive simple tokens of appreciation for their investment.
However, that does not mean that there are not some similarities. For instance, some companies advocate for this type of fundraising given the tangential benefits of raising capital through these platforms. While great ideas may be able to secure ample funds from the angel community, through the crowd, a project can garner a larger pool of opinions and suggestions in order to develop a better product before its launch. Overall, raising capital from the crowd is a nascent concept in mainland China. People are still experimenting with the best way to promote this type of financing in the absence of specific laws from the central government; however, many are optimistic that it will continue to develop unhindered by the state, given how both the industry and the government seek to encourage technological innovation, particularly in cultural trades.