The paper "Crowdfunding: Tapping the Right Crowd" by Paul Belleflamme, Thomas Lambert, and Armin Schwienbacher explores the concept of crowdfunding, which involves raising external finance from a large audience where each individual contributes a small amount. The authors develop a model that links crowdfunding with pre-ordering and price discrimination, analyzing the conditions under which crowdfunding is preferred over traditional forms of external funding. They find that crowdfunding offers enhanced experiences to some consumers, allowing entrepreneurs to practice second-degree price discrimination and extract more consumer surplus. However, the entrepreneur is constrained by the amount of capital needed, which limits the profitability of the menu pricing scheme. The paper highlights the importance of community-based experience for crowdfunding to be viable and shows that it is most profitable for lower levels of finance. The analysis also reveals that crowdfunders pay more than regular consumers due to the community benefits they enjoy. The authors conclude by discussing the trade-offs and implications of crowdfunding as a distinct form of entrepreneurial finance.The paper "Crowdfunding: Tapping the Right Crowd" by Paul Belleflamme, Thomas Lambert, and Armin Schwienbacher explores the concept of crowdfunding, which involves raising external finance from a large audience where each individual contributes a small amount. The authors develop a model that links crowdfunding with pre-ordering and price discrimination, analyzing the conditions under which crowdfunding is preferred over traditional forms of external funding. They find that crowdfunding offers enhanced experiences to some consumers, allowing entrepreneurs to practice second-degree price discrimination and extract more consumer surplus. However, the entrepreneur is constrained by the amount of capital needed, which limits the profitability of the menu pricing scheme. The paper highlights the importance of community-based experience for crowdfunding to be viable and shows that it is most profitable for lower levels of finance. The analysis also reveals that crowdfunders pay more than regular consumers due to the community benefits they enjoy. The authors conclude by discussing the trade-offs and implications of crowdfunding as a distinct form of entrepreneurial finance.