Jing Dong Mall (JD.com), the second biggest e-commerce platform in China, announced on Friday that its crowdfunding platform, administered by JD Finance, has raised RMB one billion (USD 167 million) in 14 months.
The platform was launched last July. According to JD, over 2000 projects have been proposed since then, among which 14 have raised over RMB ten million (USD 1.59 million).
Kickstarter, the biggest crowdfunding platform in the U.S., spent five years achieving its first USD “one billion.” Based on figures from its 2014 annual financial report, over the past five years Kickstarter has raised a total of USD 1.27 billion, of which USD 440 million was raised in 2014 alone.
JD’s crowdfunding platform and Kickstarter both made money in 2014, but comparing the two, the business model of JD is more complicated than Kickstarter.
The first significant difference is that JD isn’t only a reward-based crowdfunding platform like Kickstarter. Kickstarter is purely a reward-based crowdfunding platform through which contributors can receive certain rewards when projects succeed. The rewards are normally product derivatives of the project itself.
JD launched crowd equity projects earlier this month to compliment its existing reward-based projects. Because of the restraints of China’s private equity regulations, the crowd equity projects on JD are more similar to long-term P2P loans. Contributors can invest a certain amount of money – normally a minimum of RMB 10,000 (USD 1,587) in a project – in return for a stake in the company.
If the company makes a profit on agreed terms, contributors share profits accordingly. If the company takes a loss, contributors don’t share the burden of the loss and still get their investments back.
Projects on JD are “lighter” and more casual. Earlier this year, JD launched a fun-based fast project proposal tool which it refers to as ‘Light Crowdfunding.’ Light Crowdfunding projects don’t require proper rewards. One such project, recommended on the light crowdfunding page of JD, asks backers to assist with helping a user “buy an iPhone 6S.”
Weird projects can be found on Kickstarter occasionally. A potato salad project raised over USD 70,000 on Kickstarter last year, but compared with the Light Crowdfunding projects on JD, which offer no rewards at all, at least the potato salad backers received their salads! To an extent, crowdfunding has become a social tool in China, deviating from its original purpose: to raise money to initial a project for a fast turnover.
One shared feature between Kickstarter and JD is that both have witnessed more cultural projects than technological projects embrace success. Last year, over 4009 music projects successfully completed their fundraising on Kickstarter against only 1124 technology projects. JD saw the success of, indie pop band, Good Sisters, raising RMB two million (around USD 317,000) enabling them to hold a concert at one of the biggest venues in Beijing.
Compared to technology projects, the amount of money needed for a cultural project is relatively low and production periods are also shorter, which may be the reason that cultural projects find it easier to succeed on crowdfunding platforms.
Though all crowdfunding platforms are transforming into marketing platforms for product manufacturers, Kickstarter is still attempting to maintain its initial mission of helping people at the early stage to launch their projects. After raising USD 1.27 billion over the last five years, it officially turned public benefit corporation last Monday, and will donate 5% of profits to local communities each year.
As a subsidiary of JD, it’s unlikely JD’s crowdfunding will follow Kickstarters lead. Instead, JD will likely cooperate more with brands and be more profit-driven. In June, JD collaborated with Samsung to launch the S6 Edge Ironman on JD’s crowdfunding attracting over 359,000 contributors. This is a good example of a crowdfunding platform serving as a marketing and pre-launch tool on top its fundraising functionality.
Considering JD’s positioning as an e-commerce business, it’s highly likely that JD’s crowdfunding will slowly develop into a marketing platform rather than remain as a pure fundraising site.
(Photo from JD.com’s crowdfunding website)