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The evolution and adoption of equity crowdfunding: entrepreneur and investor entry into a new market

Small business economics, 2018-08, Vol.51 (2), p.425-439 [Peer Reviewed Journal]

Springer Science+Business Media 2018 ;The Author(s) 2018 ;Small Business Economics is a copyright of Springer, (2018). All Rights Reserved. © 2018. This work is published under http://creativecommons.org/licenses/by/4.0/ (the “License”). Notwithstanding the ProQuest Terms and Conditions, you may use this content in accordance with the terms of the License. ;ISSN: 0921-898X ;EISSN: 1573-0913 ;DOI: 10.1007/s11187-018-0009-5

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  • Title:
    The evolution and adoption of equity crowdfunding: entrepreneur and investor entry into a new market
  • Author: Estrin, Saul ; Gozman, Daniel ; Khavul, Susanna
  • Subjects: Business and Management ; Crowdfunding ; Customers ; Entrepreneurial finance ; Entrepreneurs ; Entrepreneurship ; Equity ; Finance ; High risk ; Industrial Organization ; Investors ; Management ; Mass media ; Microeconomics ; Ownership ; Policy making ; Portfolios ; Social media ; Social networks ; Ventures
  • Is Part Of: Small business economics, 2018-08, Vol.51 (2), p.425-439
  • Description: Equity crowdfunding (ECF) offers entrepreneurs an online social media marketplace where they can access numerous potential investors who, in exchange for an ownership stake, may supply them with finance. In this paper, we describe the evolution of this market in the UK. Using an inductive qualitative longitudinal research design, we analyse the emerging views of entrepreneurs and investors towards ECF. Our interviewees include large and small-scale investors, as well as market participants who have chosen not to invest or raise funds via ECF. We find that the large financial flows to entrepreneurs in the UK via the ECF platforms, nearly half a billion GBP since 2011, have probably been largely incremental to traditional sources of early stage entrepreneurial finance. Moreover, our research indicates that for the most part, investors appear to understand and appropriately evaluate the risks that they are bearing; ECF investments are perceived as a high risk, high return component within individuals' portfolios. Investors also use their communication with peers and entrepreneurs via the ECF platform as a learning tool. On the entrepreneurs' side, ECF allows them to test their products, to develop their brand, to build a loyal customer base and to turn customers into investors. We conclude that policymakers, with the support of a locally appropriate regulatory framework, could support equity crowdfunding as one of the market choices available for entrepreneurs looking to start or grow their ventures.
  • Publisher: New York: Springer
  • Language: English
  • Identifier: ISSN: 0921-898X
    EISSN: 1573-0913
    DOI: 10.1007/s11187-018-0009-5
  • Source: Springer Nature OA/Free Journals
    ProQuest Central
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