Matching founders and funders in equity crowdfunding

For many innovative new ventures, access to capital is essential to enable growth. However, their specific characteristics often make it difficult to obtain the required financial resources. In recent years, equity crowdfunding has emerged as a new financing source for these ventures. Unlike established early-stage financing processes, ventures initiate an open call for funding over the Internet. In this way, private individuals can – with a relatively small financial commitment – invest in these firms and benefit from their growth. However, the online setting and the presumably limited experience of these investors raise various practical and theoretical questions.
In this dissertation, I explore how capital-seeking ventures and these presumably less experienced investors interact with each other and match their interests in this new setting. Therefore, this dissertation considers perspectives and interactions from both sides of the market. More specifically, it analyses the ventures’ motivation to use equity crowdfunding, the investors’ funding behaviour and the role of specific Internet portals in connecting both sides. The results are presented in three empirical papers.
On the demand side, I reveal specific motivational drivers of crowdfunded ventures and link these with individual decision-making backgrounds. In this way, four different motivational types are developed, showing a differentiated picture of the ventures’ motivation. On the supply side, this dissertation shows that investors assess the financial commitment of the entrepreneurs as relevant for their investment decision. Thus, entrepreneurs with comparatively more ex ante financial commitment achieve significantly higher funding success. The findings also reveal the critical role that crowdfunding platforms play in this context. Hence, these platforms support both sides in numerous activities to mitigate information asymmetries and to reach agreement.
Based on the literature and the empirical findings, an early-stage matching model is developed and applied. In this way, differences are revealed between equity crowdfunding and established early-stage matching scenarios. Taken together, this dissertation illuminates important theoretical and practical peculiarities of this new investment process. Furthermore, it raises several questions for future research seeking to understand this process more comprehensively.