Equity crowdfunding determinants of success

1
LONDON SOUTH BANK UNIVERSITY
MASTER’S LEVEL RESEARCH-BASED BUSINESS PROJECT
Topic: Equity Crowdfunding: Determinants of Success
Student ID:
Supervisor:
Submission Date:

2
TABLE OF CONTENTS
TABLE OF CONTENTS................................................................................................................ 2
LIST OF FIGURE AND TABLES ................................................................................................. 3
EXECUTIVE SUMMARY ............................................................................................................ 4
CHAPTER 1. INTRODUCTION ................................................................................................... 5
1.1. Contextual Background and Research Problem .................................................................. 5
1.2. Research Aim and Research Questions ............................................................................... 7
1.3. Research Objectives............................................................................................................. 8
1.4. Thesis Structure.................................................................................................................... 8
CHAPTER 2. LITERATURE REVIEW ...................................................................................... 10
2.1. Review of Crowdfunding and Equity Crowdfunding ........................................................ 10
2.2. Determinants of Equity-Based Crowdfunding................................................................... 11
2.2.1. Campaign Characteristics ........................................................................................... 12
2.2.2. Networks ..................................................................................................................... 14
2.2.3. Understandability........................................................................................................ 16
CHAPTER 3. METHODOLOGY ................................................................................................ 18
3.1. Research Philosophy and Research Approach................................................................... 18
3.2. Research Design and Research Method............................................................................. 19
3.3. Data Collection and Data Analysis .................................................................................... 20
3.4. Ethical Consideration......................................................................................................... 21
CHAPTER 4. DATA PRESENTATION ..................................................................................... 23
4.1. Secondary Data Analysis ................................................................................................... 23
4.1.1. An Overview of Global Crowdfunding Market.......................................................... 23
4.1.2. Analysis of Equity-Based Crowdfunding Characteristics .......................................... 26
4.2. Discussion.......................................................................................................................... 32
CHAPTER 5. CONCLUSION...................................................................................................... 33
5.1. Theoretical Implications .................................................................................................... 33
5.2. Key Findings and Recommendations ................................................................................ 33
5.3. Limitations and Directions for Future Research................................................................ 35
REFERENCES ............................................................................................................................. 37

3
LIST OF FIGURE AND TABLES
Figure 1. Global crowdfunding funding between 2014 and 2016 (in $US millions) ..................... 6
Figure 2. Global crowdfunding market size between 2018 and 2025 .......................................... 23
Figure 3. Crowdfunds by regions and growth rate 2013-2014..................................................... 24
Figure 4. Leading equity crowdfunding portals in 2019............................................................... 26
Figure 5. Crowdfunding share by categories in 2018 (after excluding China)............................. 27
Figure 6. Crowdfunding growth rate by categories ...................................................................... 27
Figure 7. . Crowdfunding share by business models in 2018 ....................................................... 27
Figure 8. Property types for equity crowdfunding investment .................................................... 28
Figure 9. Equity crowdfunding according categories ................................................................... 29
Figure 10. German dissolved and insolvent equity crowdfunding campaigns (2011–2015) .Error!
Bookmark not defined.
Figure 11. Leading portal for equity-based crowdfunding ............Error! Bookmark not defined.
Table 1. Top 30 countries for crowdfunding by volume in 2018 ................................................. 25
Table 2. Fraction of equity crowdfunding campaigns getting venture capital or business angel
funding before, during, and after the campaign (2011–2015) ...................................................... 29
Table 3. Exit for equity crowdfunding market in Germany between 2011 and 2015 ............Error!
Bookmark not defined.

4
EXECUTIVE SUMMARY
This dissertation in general presents an investigation into the role of equity crowdfunding in
determining the success for start-ups and entrepreneurs in today’s business. The use of
crowdfunding, as a special online form of crowdsourcing, was originally recognized as a pathway
to help raise fund for projects or ventures from a large number of people (crowd) and donators.
This has then become a popular tool for financing new ventures across different fields. Nowadays,
many small companies rely on equity-based crowdfunding as a major source of financing in order
to seek funding and capital for their business operations and associated activities. This calling for
investment in the early stage of the venture, as an exchange for stake and ownership, opens up
huge opportunities for start-ups and small-scale firms to quickly expand their business ideas and
scope. This current work deepens this phenomenal growth to understand the importance of equity
crowdfunding as a medium for small businesses and more importantly to examine a number of
determinant factors that drive the success of equity crowdfunding for small firms. With this goal,
this paper critically reviews the extant scholarly literature on crowdfunding as well as theorizes
and empirically analyzes several factors that are considered the key for a successfully equity
crowdfunding campaign. These success factors are campaign characteristics, networks, and
understandability. Overall, this research-based business project report enhances our knowledge of
the role of equity crowdfunding and provides useful, practical and relevant suggestions to both
crowdfunding platforms and entrepreneurs for successfully dealing with equity crowdfunding
campaigns

5
CHAPTER 1. INTRODUCTION
The introduction of this report attempts to establish the panorama of this business research project,
which describes the background of the study and inspires the readers on the highlighted research
problem of equity crowdfunding for small companies. This rationale for conducting this current
research allows formulating the major research questions as well as more specific research
objectives that are to be accomplished at the end of this individual project report. The final part of
this introductory chapter unit gives a brief outline to help the readers easily follow up the rest of
this business report.
1.1. Contextual Background and Research Problem
Crowdfunding is literally composed of “crowd” and “funding”, which should therefore be
understood as an Internet-based form of raising fund and monetary resources from a large base of
investors (crowd), primary via online platforms or social media sites (Block, Hornuf, and Moritz,
2017). This channel has rapidly emerged and been increasingly adopted by young enterprises to
become one of the most used (online) alternative for collecting early-stage funding as this
encourages start-ups to shift from the traditional venture capital (VC) through personal loans from
friends, family members or bank and private equity services to virtual environment for raising their
funds (Block, Hornuf, and Moritz, 2017). This new option is referred to as equity crowdfunding,
calling for investments and supplies of direct funds from public investors in exchange for a
proportionate part of equity/shares and ownership of the new business venture (Vulkan, Åstebro,
and Sierra, 2016).
Initially, crowdfunding was only used as a tool for funding small-scaled business and increase the
capital investment but gradually it has been a widely used mechanism by even large-scale
businesses as well. Equity crowdfunding is not only a tool for funding but also come up as an
element for reducing the funding barriers and drawbacks in primary stages of carrying out the
business activities (Block, Hornuf, and Moritz, 2017). In the early stages of business (e.g. start-
ups), funding is generally done by the owners/founders or by family members and friends and
although there are also certain instances in which company can approach an angel investor to seek

6
the investment and gain the success, these cases are very rare (Vismara, 2016). Equity
crowdfunding has then been considered to be the best practical alternative to overcome these
funding barriers, which helps small enterprises to fulfill the gaps in financing the business in the
early phase. In fact, the equity crowdfunding has grown rapidly, thereby the global crowdfunding
market was estimated to be valued at over $10 billion in 2018 and is predicted to reach nearly $30
million by 2025 (Picardo, 2020). Despite some own risks such as fraud, equity crowdfunding can
be deemed as the most emerging and available way for small businesses to seek the financial
investment in online environment. Figure 1 illustrates the worldwide growth of funds raised by
crowdfunding method from 2014 to 2016, showing a rising tendency toward this form of financing.
Figure 1. Global crowdfunding funding between 2014 and 2016 (in $US millions)
Source: Statista (2020a)
Although many platforms for equity crowdfunding have been developed over the past decade,
replacing and threatening the traditional forms of venture capital (VC) and business angel to
finance start-up companies (e.g. TV show Shark Tank), this Internet-oriented financing has not
been paid enough and sufficient attention by scholars (Vulkan, Åstebro, and Sierra, 2016). In other
words, the extant scholarly literature provides relatively poor knowledge of this financing
phenomenon. More specifically, it remains unclear and largely unaddressed by the current research

7
regarding the importance of equity crowdfunding in financing start-ups and small-scale enterprises
as the existing body of literature provides a mixed and inconsistent picture on this particular social
and financing phenomenon and more importantly fails to give a thorough understanding of
significant determinants behind a successful equity crowdfunding campaign (i.e. drivers of
investment decision for equity crowdfunding, Lukkarinen et al., 2016). In this regard, Lukkarinen
et al. (2016) state that criteria for successful venture capital (VC) and business angel, as two
financing fields similar to equity crowdfunding, are not primary conditions for successful
crowdfunding, some public network and online characteristics represent more importance to
succeed in this emerging field of equity crowdfunding.
In response, this research paper attempts to address the above research paucity from an empirical
perspective. It first drafts the theoretical literature on crowdfunding, and although there are several
types of crowdfunding (e.g. reward, donation, lending, Vulkan, Åstebro, and Sierra, 2016), this
paper particularly fouses on reviewing only equity-based crowdfunding. On the other side, since
equity-based crowdfunding basically refers to the process wherein the start-ups and businesses at
the initial stage are being funded by the public crowd or investors and in return, they get the shares
and ownership of the new venture, shareholders cum investors expect to receive company’s profit
in the future if their investment succeeds in the marketplace. This interdependence between
investors and owners/founders then indicates several conditions that must be guaranteed for a
successful equity-based crowdfunding campaign. The empirical data from both secondary source
and primary source (i.e. interviewing) in this study then enable deepening the knowledge of critical
factors that determine a successful equity-based crowd funding (Moritz and Block, 2016).
1.2. Research Aim and Research Questions
In response to the phenomenal growth of equity crowdfunding, the main aim of this research paper
is to understand the impact of equity crowdfunding on driving business success for start-ups and
small-scale enterprises, this aim’s scope also covers the investigation into factors behind the
successful equity-based crowdfunding campaigns. In particular, this overall research is broken
down into the two following primary research questions which should be answered and solved
thoroughly after completing this business project:
RQ1: Is equity crowdfunding the best alternative to financing start-ups and small-scale ventures?

8
RQ2: What are the determinant factors for such successful equity crowdfunding campaigns?
1.3. Research Objectives
While research questions give the direction for the research procedure and subsequent steps,
research objectives clearly state what are to be achieved in the end. In line with those two research
questions above, this research report is particularly focused on addressing the below specific
research objectives:
To review the extant literature on equity-based crowdfunding as well as gain a comprehensive
knowledge of fundamental determinants of equity crowdfunding.
To examine the role of equity crowdfunding in promoting business success for start-ups and small-
scale companies.
To identify potential factors that determine the successful equity-based crowdfunding campaigns.
To provide recommendations to small-scale enterprises with regarding to successfully running
equity crowdfunding campaigns.
1.4. Thesis Structure
After having established an overall sense and goal of this business research project, the remainder
of this is organized into the four consecutive chapter units that are all linked to this first chapter.
Chapter 2 shall cover the extant literature related to crowdfunding in order to build the theoretical
grounding for this research work. In addition to this careful review of equity crowdfunding,
another focus of this second chapter will be placed on critically reviewing different determinant
drivers behind a successful equity crowdfunding. Next, Chapter 3 will address the methodology
for proceeding this research, in alignment with descriptive research design, the emphasis will be
on justifying the right research philosophy and research approach as well as the research method
strategy. The acquisition of secondary data and the data analysis approach will then be carefully
explained prior to discussing the ethical facet of this research project. Subsequently, Chapter 4
shall concentrate on summarizing and presenting the empirical data being collected, which helps
to support as well as empirically test those theorized determinant success factors of equity
crowdfunding. Empirical results will then be compared with those from past scholars for

9
discussion. Finally, Chapter 5 will wrap this business report up, summarizing the key findings and
highlighting the implications for both theory and practice. The end of this report will acknowledge
a number of key limitations together with directions for further improvements.

10
CHAPTER 2. LITERATURE REVIEW
This second chapter mainly aims to cover the literature related to this research topic. It first reviews
the conceptualization and evolution of equity crowdfunding from the financial point of view, this
helps the general readers to shape the background knowledge of this concept. Based on this, the
ensuing part critically discusses and theorizes different theoretical drivers that might determine the
success for crowdfunding from the existing body of literature. Overall, this chapter builds the
theoretical underpinnings for this research prior to moving to the next chapters.
2.1. Review of Crowdfunding and Equity Crowdfunding
Financers, policy makers, investors and practitioners have recently been interested in
crowdfunding as the latest trend in the financial market that helps to deal with traditional
entrepreneurial barriers and market failure (Cumming, Meoli, and Vismara, 2018). Crowdfunding
is made-up by “crowd” and “funding”, which literally means financial activities related to raising
fund from the crowd and being normally taken place in online environment (Block, Hornuf, and
Moritz, 2017). In pace with the global Internet popularity, this new form of funding has
increasingly been adopted as one of the most emerging alternatives to raising fund for start-up
businesses in the early-stage, steering away from the traditional venture capital (VC) (Block,
Hornuf, and Moritz, 2017). There are the three different models of crowdfunding: reward model,
lending based model, and equity-based model (Robiady, Windasari, and Nita, 2020). For the
reward system, the campaigners offer the reward such as project membership or profit share with
the funders based on their contribution (Robiady, Windasari, and Nita, 2020). In lending based
model, which is the least popular among the three, refers to crowdfunding platforms that serve as
credit provider to entrepreneurs and offer fixed return, this kind of system can also be known as
peer-to-peer (P2P) business model (Robiady, Windasari, and Nita, 2020). In equity-based model,
which is the core of this thesis paper, funders shall be given a portion of ownership (Robiady,
Windasari, and Nita, 2020). In particular, this equity crowdfunding calls for investments from
public investors in exchange for a fraction of equity sharing and ownership of the new business
venture (Vulkan, Åstebro, and Sierra, 2016).
In the early business stages, funding is generally made by the owners/founders or by family
members, as the traditional venture capital (TVC) or by angel investors (Vismara, 2016). The

11
emerge of equity crowdfunding offers an alternative to overcome such conventional ways of
financing the business, which helps small enterprises to fulfill the gaps in financing the business
in the primary phase. Equity-based crowd funding gives people and crowd a chance of acting as
investors to own share and gain profit from their investment. Vulkan, Åstebro and Sierra (2016)
emphasize that equity-based crowdfunding is a font for increased liquidity and flexibility and
advanced consumption of goods and products. Moreover, Cumming, Meoli and Vismara (2018)
have pinpointed that equity-based crowd funding is not only a sponsoring and funding method for
the companies but also a tool for the public customers to have better access to company profit and
business. Despite some risks such as fraud, equity crowdfunding, which is largely driven by
personal beliefs of investors, can be deemed as the most emerging and available way for small
businesses to seek the financial investment in virtual setting.
2.2. Determinants of Equity-Based Crowdfunding
The extant bulk of scholarly literature on crowdfunding has documented a number of factors that
gain their importance in relation to the success of crowdfunding campaign. Belleflamme, Lambert
and Schwienbacher (2013a) have conducted interview with experienced crowdfunding
entrepreneurs and businessmen and then drawn the conclusion that expectation of return or profit
sharing is the most important motivation for investing in equity crowdfunding to finance a
business. Meanwhile, Cumming, Meoli and Vismara (2018) propose the two models for building
a successful equity-based crowdfunding: “all or nothing” (AON) model and “keep it all” (KIA)
model. Broadly, prior papers have highlighted that, in general, research on the determinant factors
contributing to the success of crowdfunding for financing the business provides mixed and
inconsistent results (for review, see Moritz and Block, 2016; Vismara, 2016).
Prior to addressing important factors for crowdfunding campaign, it would be of relevance to first
review critical criteria for funding through venture capital (VC) and business angel as two
traditional forms that contradict the crowdfunding method. Venture capitalists often consider both
professional experience of the entrepreneurs and uniqueness of the new product/business ideas in
the marketplace as well as market potential as three essential decisive factors (Lukkarinen et al.,
2016). This professionalism refers to entrepreneurs’ experience in the financial market while the
unique attributes of the product may be related to its competitiveness, innovativeness, and current

12
stage in the product life cycle and market-driven factors refer to growth potential and market size
(Streletzki and Schulte, 2013). In general, the key decision criteria for business angels are alike to
those of venture capital (VC). Thereby, angel investors are particularly interested in the role of
entrepreneur, market and product but angels might focus more on the significance of entrepreneurs
while VC emphasizes the product and market more (Ding, Sun, and Au, 2014). Besides that, trust
in entrepreneur is the primary condition for angels to consider an investment, it is followed by
business plan, and potential revenue growth. Overall, literature in both VC and angel investor
seems to agree that personal characteristics of the entrepreneurs and management team (i.e. human
capital) are still the most significant decisive criteria for making financial investment. This study
slightly steers away from these traditional successful criteria in order to focus on three relatively
distinct pillars driving the successful equity-based crowdfunding: campaign characteristics,
networks, and understandability, which follows the previous systematic work of Lukkarinen et al.
(2016).
2.2.1. Campaign Characteristics
A sizeable bulk of previous research on crowdfunding has largely documented that characteristics
of the campaign are the most important decisive criteria that funders take into account before
making decision, thus campaign characteristics have a big impact on the crowdfunding success
(Lukkarinen et al., 2016). In this paper, funding target, campaign duration, geography, and social
cause associated with sustainability are underlying campaign characteristics to be covered.
Each crowdfunding campaign usually sets a target range for the expected funding amount, which
can be categorized into the two underlying models: keep-it-all (i.e. entrepreneurs retain any
collected money to operate the business); and all-or-nothing (i.e. entrepreneurs form a goal for the
minimal funding target before the campaign and only take the invested money once the target goal
is reached (Piva and Rossi-Lamastra, 2017). For all-or-nothing system, entrepreneurs must be
careful to set a suitable minimal cut-off because if the accumulated fund in the end falls below this
line, the campaign will fail. As such, to implement this model, start-ups have to consider both
sufficient funds and minimum threshold (Lukkarinen et al., 2016). In connection with this, Ahlers
et al. (2015) unveil a statistical positive link between minimum investment requirement and sum

13
of gathered funding. This means that when the target threshold is smaller, it is easy to raise fund
from the crowd.
Prior to running a crowdfunding campaign, the duration for this campaign is usually scheduled
ahead. Mollick (2014) hold the idea that longer span for campaign shapes an adverse impact on
the likelihood of campaign success because a long period signals entrepreneurs’ lack of confidence
in the light that they are afraid their new product offerings or business ideas are not good enough
to quickly raise enough fund within a short period of time. It has also been concluded by Mollick
(2014) that equity-based crowdfunding diminishes when there is an increase in the duration of
business projects. Lukkarinen et al. (2016) add that longer period for running a crowdfunding
campaign is unnecessary as the amount of funds only surges in the beginning and in the end of the
campaign whereas the middle stage normally witnesses a quiet period. Hence, the smaller the
project in the time period, the greater the chances of successful equity-based crowd funding. As
the same time, as funding a new business is a financial investment that involves risks, giving too
much time to investors to consider the investment carefully might backfire as this turns risk-
seeking investors to risk-averse persons (Lukkarinen et al., 2016).
Geographical factors and proximities have already been analyzed by various research scholars and
it has been stressed that the lesser the distance between the capital providers and business owners,
the higher the successful chances of equity-based crowd funding (Burtch, Ghose, and Wattal,
2012). This is related to the concept of psychic distance in international business, because
crowdfunding activities occur in virtual environment, there are no geographical barriers and it
means that such crowdfunding activities can be taken place in cross-border context. As such, there
could exist cultural, political, social and legal dissimilarities between entrepreneurs’ base and
funders’ base and psychic distance basically embraces these differences (Burtch, Ghose, and
Wattal, 2012). With geographical closeness, this psychic distance is considerably mitigated and
this helps to remove the disparities between investors and entrepreneurs to enhance trust and build
warm relations for higher chance of funding. Meanwhile, Ralcheva and Roosenboom (2016)
emphasize the technological advancement and innovation of the market where the campaign is
based, the authors elaborate that the US and Germany have booming equity-based crowdfunding
sector due to the advanced level of technologies and innovations that remarkably supplement the
project to be operated in these markets. Moreover, legal environment of the geographical location

14
is of importance. For instance, in the US, the Jumpstart Our Business Startups Act (JOBS Act)
which was enforced in 2012 becomes an essential legal framework that eliminates many securities
regulations in order to promote the funding for small ventures (Ralcheva and Roosenboom, 2016).
Another vital motivation to engage in crowdfunding is attributed to social cause. It is imperative
to note that those enterprises which are working for social cause and defined as non-profit
organizations also seek crowdfunding in order to maintain and operate their social activities. It has
been noted by Cai, Polzin and Stam (2019) that equity-based crowdfunding and social cause-
related businesses can be in harmony with each other. In other words, there is no conflict between
non-profit purpose and aim for calling fund from public via online platforms. One way for
promoting the focus on social cause of the campaign is to concentrate on the sustainable nature of
the product offerings for the funding process. Indeed, the promotion of sustainability by the firms
is one core idea that has attracted investors and led to the success of equity-based crowdfunding
(Angerer et al. 2017). As already known, sustainability is known for collective good which
deserves to be in the list of core values being promoted by the companies. Hence financiers are
more attracted by the idea of sustainability which has led to the development of the crowdfunding
process. In reality, sustainability-oriented ventures in equity crowdfunding has been reported to
improve the number of engaged professional investors and subsequently enhance the chances of
success (Vismara, 2019.
2.2.2. Networks
The notion that network plays a critical role in crowdfunding has been agreed by a growing number
of scholars (Helsinki, 2014). This means that funders and investors can be the ones that are from
the personal networks and connections of the primary entrepreneurs. Lukkarinen et al. (2016)
classify networks for equity crowdfunding into two main types: private networks, and social
networks. It is a norm that a considerable contribution to the fund is from the private networks
such as friends or family members. This source of financing plays a critical role in the early days
of the new business venture. In fact, previous research has pointed to the fact that capital providers
such as family members and friends are contributive factors in the initial phases of the
crowdfunding project (Lin and Viswanathan, 2016). This point is expanded by Kuppuswamy and
Bayus (2013) who reinforce the influence on the campaign success from friends and family who

15
play an important role in the subsidy processes, especially at the initial and final phases of funding
as this is the time when the owner lacks funding and the probability of the contribution by family
and friends increases.
On the other side, in the digitally mediated era, relationships shift toward social media environment
and social media networks thus increasingly contribute to the campaign success. Prior research has
highlighted that the level of being active and interactive on social media, such as number of posts
or social media page size measured by the number of followers/subscribers, would be a strong
predictor of campaign success because such signals of interactions help to enhance the “tie
strength” which is defined as the reciprocal relationship between the focal broadcasting point (i.e.
entrepreneur) and other social actors/users (Zheng et al., 2014). In fact, interacting socially through
various social networks has been seen as a success factor for the development of equity-based
crowdfunding as capital providers also seek to grow their interaction through social networks.
There have been various quantitative studies being conducted to see how social interactions
motivate capital providers to invest and develop equity-based crowfunding. It has been argued by
several researchers that equity-based crowdfunding grows immensely as it offers a platform for
social interactions and thus social interaction is one of the determinant success factors which is
accountable to the growth of equity-based crowd funding (Lukkarinen, et. al., 2016). The reason
for this is that social networking helps to decrease information irregularities, there is an increase
in the probability of funding (Lin and Viswanathan, 2016). These social media channels become
the network connecting entrepreneurs and other potential online funders and more importantly the
low-cost marketing and public relations (PR) tool for showcasing and promoting the new
crowdfunding campaign. In other words, if entrepreneurs are social influencers, they are more
likely to succeed in their campaign (Lukkarinen et al., 2016). As such, aside from personal
characteristics, the public influence would be a vital contributing factor.
The timing of investment in online environment is also an important factor that has emerged to be
relevant to the progress and advancement of equity-based crowdfunding. The funding of the large
public is increased when the online public is convinced through signals that the right time for
funding is prevailing. The behavior of the peers in social media environment is the signals on
which the decision of the capital providers depends and thus it is those kinds of online behaviors
that are the determining factor for the growth of equity-based crowdfunding via social media

16
(Lukkarinen et al., 2016). It has been opined by Qiu (2013) that the comments, posts and other
relevant signals from the social networking peers along with media coverage give an affirmative
and positive effect on equity-based crowdfunding transactions. Also, in the view of Moritz (2014),
the endorsement by the peers is regarded as a signal from the peer which affects the transactions
of crowdfunding positively. Thus, signals from the peers within social media environment have
also emerged as an important determinant success factor for the growth and development of equity-
based crowdfunding (Wallmeroth, Wirtz, and Groh, 2018). On the other side, Ahlers et. al. (2015)
have conducted research to see which signals are relevant and should be considered while
proceeding with the decision of crowdfunding. The authors for this purpose have analyzed the data
collected from an Australian crowdfunding platform which is equity-based. It has then been
concluded by this research that the board members who are well educated and experienced and are
of high levels and strong networks are more likely to send positive signals through social
networking channels and thus are more likely to get funded by means of equity-based
crowdfunding.
2.2.3. Understandability
Some prior studies have noted that the role of understandability should not be underestimated when
proposing a crowdfunding campaign. Belleflamme, Lambert and Schwienbacher (2013b) in this
regard state that the extent to which the concept of new product offering and new business idea
can be understood would play an important role in the campaign success because this is relevant
to whether the investors can easily understand the new ideas or offerings from the entrepreneurs.
Lukkarinen et al. (2016) point to the fact that product offerings have higher chance of being
successfully crowdfunded as compared to service offerings, which is because investors can easily
understand the tangible features of the physical product while they might encounter difficulties to
understand the ideas behind a service offering that is greatly intangible by nature. With strong
tangible sense, funders can shape a clear perception of the certainty or reduce the perception of
uncertainty, which is an important factor for investing in new businesses that often incur high
degree of risk (Ellman and Hurkens, 2019).
One way to enhance the understandability of the crowdfunding campaign is to focus on setting
clear goal. In fact, it has been researched by the scholars that the setting of particular goals is also

17
concluded to be a factor for the evolution and progress of equity-based crowdfunding. This is
called the goal-setting theory. A goal is defined as an aim or target which is to be achieved by the
company, for example, to complete a particular project in a specific span of time. Thus, in the
context of crowdfunding, it has been argued that clear goals set for a project being funded by
crowdfunding lead to strong motivation for the investment in that project and thus give rise to
strong equity-based crowdfunding (Zhou et al., 2016). It is also said that that the people funding
in the business by means of crowdfunding under the goal theory are likely to fund a larger amount
of funds for the businesses (Kaartemo, 2017). Setting goals is actually a crucial personal
characteristic of entrepreneurs, which reflects their human capital that signals the potential of the
success in equity crowdfunding (Piva and Rossi-Lamastra, 2017).
Another method for improving the understandability is the provision of financials. In particular,
the provision of related financial information such as historic financial statements or projection of
future revenue and earnings are important indexes that investors might consider. Mollick (2014)
in relation to this contend that when entrepreneurs offer no financials, investors are confused and
reduce the trust toward the entrepreneurs, which then makes the campaign less attractive.
Similarly, Ahlers et al. (2015) have pointed to the fact that such campaigns that do not supply the
reliable financial forecast and prediction tend to acquire substantially less funding amount as
compared to those that offer more relevant financial information. This supply of financial
information is consistent with the aspect of professionalism of the crowdfunding. In fact, another
determinant success factor for equity-based crowd funding is its professionalism such as video
presentation of the project that works as a proxy for professionalism. Further, in view of Pitschner
and Pitschner-Finn (2014), the frequent updates and progress of the project being provided by the
companies to the capital providers provide up-to-date information about the campaign and is also
deemed as a tool for attracting more funds from the providers as the progress of the company shall
influence the capital providers in a positive way to proceed with more funding. Block, Hornuf and
Moritz (2017) empirically uncover that the number of funds made by the crowd is driven by the
updates on the campaign. Furthermore, since most of funders are not financial experts (i.e. public
investors), the use of easily understood language would be helpful to increase the crowd
participation. Also, the updates should cover information relevant to the business model,
entrepreneurship team, product development and marketing initiatives (Block, Hornuf and Moritz,
2017).

18
CHAPTER 3. METHODOLOGY
This third chapter provides an explanation for the methodology being adopted for undertaking this
research. Research methodology is the framework that will help the researchers to carry out the
investigation process in a proper manner in order to reach the set aim and objectives. This
methodology must be connected with the initial research goal consistently. As such, this chapter
hopes to give an understanding of appropriate approach and method that are necessary to gather
reliable and relevant data related to this research topic. First of all, the interpretive philosophy of
science and inductive approach are carefully justified, providing the grounding for choosing
descriptive design to conduct this current research. Consistent with this, both qualitative and
quantitative methods are described in detail in the data collection part. Eventually, some ethical
considerations are mentioned and discussed in the end of this chapter unit.
3.1. Research Philosophy and Research Approach
Scientific philosophy or paradigm is often fallen into one of two kinds, namely positivism and
interpretivism. The initial important step toward building the methodology for this research is
choosing the right paradigm that is the best suited to the purpose and nature of this research study,
which helps the research to be undertaken effectively. Positivism philosophy is the paradigm in
which the data and information must be factual in nature, which complies with the basis of the fact
that the reality is unchanging and could only be explained and analyzed from an objective
perspective (Hughes and Sharrock, 2016). Positivists claim that the theories should be isolated (i.e.
not depending on the context of the study) and there should be the same observation across people
or at different time points. This means that the reality is tested by changing only condition to
observe the repeated patterns across people or times (Hughes and Sharrock, 2016).
While positivism is undoubtedly suitable for natural sciences field, it has always been a
controversial matter to consider whether positivism philosophy is appropriate for social sciences
field or not. One limitation of positivist paradigm is that if the parameters related to the research
problem seem immeasurable, using positivism fails to gain scientific outcomes (Hughes and
Sharrock, 2016). In relation to the present study, as this study addresses the topic of equity-based
crowdfunding, it is hard to completely measure this social phenomenon with only numeric facts,

19
instead, some observations and interpretations are needed to understand this business practice. This
suggests that positivism appears inappropriate for the purpose of this current study.
On the other hand, interpretive philosophy is the paradigm that concerns the contextual perspective
of the study. Rather than purely relying on factual information and mathematics to solve the
research problem, interpretivism emphasizes the role of human, namely researchers, in giving the
meaning and interpreting the research problem being studied (Hughes and Sharrock, 2016). This
description implies that interpretive philosophy is suited to the purpose of this research study given
the nature of the selected topic. In fact, interpretive philosophy is helpful in this regard as it deals
with studying the focal research phenomenon with taking contextual factors into account (Hughes
and Sharrock, 2016).
Another major consideration refers to the theoretic-reasoning approach, between deduction and
induction. Deduction emphasizes the top-down approach wherein data must follow theory, which
means that hypotheses will be developed from the existing theories and then tested by obtaining
the empirical data (Babbie, 2012). As the review of extant literature as seen in Chapter 2 does not
concentrate on hypotheses developing, suggesting that deductive approach might not be right here.
On the contrary, inductive approach follows the bottom-up approach in which theory follows data,
which is to deepen and extend the knowledge of the current literature (e.g. theoretically driven
approach) (Babbie, 2012). This induction is suitable for the purpose of this research that wishes to
deepen and expand our current knowledge of crowdfunding and its related theories.
3.2. Research Design and Research Method
Management research can be performed in different ways and it is very important for the research
investigators to understand and know the type of research design that is best suited to the essence
of the research. In relation to this, there are the three different ways to design the empirical
research: exploratory design, experimental or causal design, and descriptive design (Creswell and
Poth, 2016). Exploratory design is congruent with exploring the research problem very broadly
using non-numerical data (Creswell and Poth, 2016). While this study certainly needs numerical
facts (e.g. numbers, figures) to understand equity-based crowdfunding, the focus on only non-
numerical information of exploratory design fails to help gain such data. Experimental design is
consistent with causality that is aimed at examining and proving the causal relationship between

20
cause factor and effect factor (Creswell and Poth, 2016). As this study is focused on understanding
successful factors behind equity crowdfunding broadly, it does not wish to deal with understanding
the causal effect of only one specific factor on crowdfunding success. In line with interpretive
philosophy, it seems that this current research is best suited to descriptive design, which is to gain
descriptive insights into the phenomenon of equity crowdfunding. In other words, descriptive
design enables describing this business phenomenal growth as well as its successful antecedents.
As such, exploratory design is regarded as the appropriate choice for this current study.
When it comes to the research method, quantitative and qualitative methods are primarily
considered. It is critically important for the investigators to first identify the nature of the study
and then the right method to be employed (Beins, 2017). Qualitative method emphasizes the
research process that is totally based on subjective perceptions and interpretations. This is a non-
numerical research technique mainly consistent with theoretical frameworks (Beins, 2017). It deals
with observations, case studies to give the meanings to the phenomenon being observed and works
for developing an in-depth understanding of the theories (Beins, 2017). Some of the popular
qualitative methodologies are phenomenology, ground theory, ethnography, or case study. in
contrast, quantitative method is the technique where the process of research is based highly on the
numerical and statistical facts (Beins, 2017). The actual figures and data provides an objective
view on the research topic. Quantitative method attempts to assess how the phenomenon changes
when changes are made to one/some variables associated with the phenomenon, this way allows
the researchers to understand the relationship and interdependence among the variables related to
the phenomenon (Beins, 2017). Some of the popularly used methods for quantitative analysis are
survey, experiment, or correlation. Given the fact that quantitative method must be well-organized
prepared as compared with qualitative method, conducting quantitative analysis includes the
development of pre-determined questions to direct the research, identification of research tools,
and establishment of procedures (Beins, 2017). Overall, since this current study needs both
numerical and non-numerical data in accordance with descriptive focus as justified previously,
both qualitative and quantitative methods are incorporated into collecting and analyzing the
secondary data (Pangrazio, 2017). That said, the use of quantitative data, such as figures, statistics,
and numbers, will be more in the data analysis.
3.3. Data Collection and Data Analysis

21
Data collection is the most essential step in this research because it provides the sources to
accomplish the research goal. The information-gathering process is basically get done through two
ways: primary data research, and secondary data research. The data that are collected through the
direct sources by directly approaching the participants to get the needed information are basically
understood as primary data (Babbie, 2012). This primary source of data is often achieved through
interviews, surveys, observations, or questionnaires (Moser and Korstjens, 2018). Meanwhile,
secondary data are retrieved from already available sources such as books, journal articles, web
sites, annual reports, magazines, market reports and the like (Moser and Korstjens, 2018). In other
words, when the data are referred from various already existing sources, it is said to be secondary
data. Effort, time and cost are less for this kind of already available data as the researchers only
need to seek the correct information that will support and justify their research topic, without
conducting primary research. As a secondary research-based project, this current study only deals
with secondary data, which are based on the public and online sources related to crowdfunding
such as market reports, journal articles to realize the research goal (Powney and Watts, 2018).
The data analysis assists the investigators to interpret all the raw facts and data into meaningful
information. In other words, data analysis process helps to produce factual outcomes that will
benefit the research to meet its goals and objectives. In alignment with taking a mixed method that
combines qualitative method with quantitative method, this study will analyze both qualitative
data and quantitative data as explained earlier. The quantitative data analysis deals with raw
numerical data such as figures, statistics, numbers, while the qualitative data analysis copes with
non-numerical data such as texts and textually driven information (Silverman, 2016). This
combination allows understanding the topic of equity crowdfunding from a holistic perspective.
3.4. Ethical Consideration
It is very important for the researchers to make sure that the research that is getting processed must
be ethical. In fact, there are many vital things that are needed to be focused by the investigators to
meet the standards of the research ethics. Therefore, this particular research pays attention to all
ethical factors to make sure there is nothing wrong with regard to the ethics during the process of
conducting this research. First, this research has been conducted totally fairly to reserve all the
rights of relevant people. For example, people who are reported in secondary data sources have

22
been referred to this study fairly and equally, without considering their background like race,
religion or age. More importantly, the research data have been stored safely, without any losses or
manipulations. Privacy and personal information related to people in this report is well secured
and not leaked publicly. Also, the use of secondary data is consistent with the original sources,
there is no falsification or fabrication in order to ensure the integrity manner of this research study
(Babbie, 2012).

23
CHAPTER 4. DATA PRESENTATION
This chapter presents the data being collected in accordance with what have been explained and
described in the prior chapter. As a secondary-based research, the main focus along this chapter
summarizes, discusses, and critically analyzes the findings from several reliable and high-quality
public sources as well as market reports related to equity crowdfunding. The new findings in this
chapter are then to be discussed relative to the existing body of literature for comparison.
4.1. Secondary Data Analysis
4.1.1. An Overview of Global Crowdfunding Market
In line with the introduction in the beginning of this paper, the global crowdfunding market has
witnessed an impressive expansion over the past few years and is projected to continue seeing a
rapid growth over the next decade. Figure 2 compares the worldwide crowdfunding market size
between 2018 and 2015, it can be inferred that 2025 size almost triples that of 2018 and this
highlights the huge potential of this relatively new financial phenomenon.
Figure 2. Global crowdfunding market size between 2018 and 2025
Source: Statista (2020b)

24
As mentioned in the literature, geography would represent an important characteristic of the
crowdfunding campaign. According to Figure 3, North American market, including the US and
Canada, has the largest regional crowdfunding market size, which almost doubles that of Asia and
Europe while crowdfunding activities seem inactive and unpopular in other parts of the world,
such as South American or Africa. However, when looking at the growth rate, it is clearly shown
that Asian region saw the highest expansion rate during this period. This is consistent with the
information being shown in Table 1, which lists top 30 global countries with high crowdfunding
volume and China is ranked number 1 in this list while the US holds the second position. Other
Asian promising marketplaces for crowdfunding include Indonesia, Japan, South Korea, Israel,
India and Singapore. A panorama is that Asia would become the huge of the global crowdfunding
market over the next decade due to the huge population and rapid and emerging economic
development in this region. In fact, entrepreneurship and start-ups have been reportedly seeing an
upsurge in many parts of Asia, especially in Indonesia and India. Since Asia-Pacific region is
predicted to lead the future of world as the global economic hub in the next decade, many
governments have attempted to solidify their position on the global map by providing many
incentives to support the local ecosystem of small businesses, and this becomes the fundamental
driver to change the landscape of entrepreneurship in these countries (Kantelia, 2019). As such,
the demand for financing businesses and raising funds in these countries would be extremely high,
driving the booming of crowdfunding activities.
Figure 3. Crowdfunds by regions and growth rate 2013-2014
Source: Rainey et al. (2017)

25
Table 1. Top 30 countries for crowdfunding by volume in 2018
Source: P2PMarketData (2020)
Figure 4 lists several portals which are popular to start-up and entrepreneurs when they want to
engage in crowdfunding to finance their business in the early stages. Three biggest platforms
(WeFunder, StartEngine, and Republic) which account for over three-fourths of the global capital
raised via crowdfunding in 2019 are all from the US. This again reflects the fact that although
China is the world’s largest crowdfunding market, the US still remains its technological
competitiveness in this game.

26
Figure 4. Leading equity crowdfunding portals in 2019
Source: Crowdwise (2020)
4.1.2. Analysis of Equity-Based Crowdfunding Characteristics
Because there are different forms for crowdfunding as reviewed previously, this section only
focuses on analyzing equity-based crowdfunding as the main focus in this report. Figure 5 shows
that as compared with debt or lending based model, equity-based model appears less popular in
2018. In particular, the crowdfunding amount through debt-based model is fifteen times as large
as that via equity-based model. This is commensurate with the information being illustrated in
Figure 6 showing that growth rate of equity-based model still lags behind that of lending-based
model during 2013-2014span. Similar pattern can also be seen in Figure 7 regarding crowdfunding
share based on business models. These sorts of information can be viewed from a different angle:
as compared to lending-based model that is currently widely popular and could therefore be soon
saturated within crowdfunding platforms, equity based model is less competitive and can be
expected to be more promising in the future because its potentials are still not fully explored by
current enterprises and businesses.

27
Figure 5. Crowdfunding share by categories in 2018 (after excluding China)
Figure 6. Crowdfunding growth rate by categories
Figure 7. Crowdfunding share by business models in 2018

28
In a recent survey targeting investors who have invested in equity crowdfunding, the results show
that investors tend to diversify their investment portfolio by investing in different properties in
exchange for their ownership of a new business. Figure 8 depicts some common properties, thereby
hedge fund is the more preferred type (40%) and it is followed by investment in real estate (21%)
and private equity (18%), respectively. Meanwhile, private credit (9%) and real asset (3%) are less
popular options for investors. When considering the type of industry/business that investors are
interested the most in making equity investment, Figure 9 highlights that entrepreneurship (i.e.
small new business venture) is commonly rated by investors, it is followed by social causes and
firm & performing arts, in that order. Meanwhile, real estate seems not so appealing to investors
in equity crowdfunding and music & recording arts are also unattractive. Recalling that
crowdfunding activities originated in arts, whereby artists go online to seek funds for their art
projects. However, when looking at Figure 9, this has changed when considering crowdfunding as
a formal financial investment as music and other forms of art are not really interested by investors
to make equity-based funding investment.
Figure 8. Property types for equity crowdfunding investment
Source: FundWisdom (2019)

29
Figure 9. Equity crowdfunding according categories
As stated earlier, equity crowdfunding can be regarded as an alternative to the traditional venture
capital (VC) and angel investment. Before crowdfunding was born and became popular, small
businesses had been heavily reliant on these two options for financing their business. Table 2
demonstrates the proportion of equity crowdfunding campaigns in Germany and the UK that could
receive either form before, during, and after the campaign. In general, this portion is consistently
low across the two countries (mostly under 10%). Importantly, the rate is only high before the
campaign is ran but during and after the campaign, this rate is relatively shrunk. This means that
once the crowdfunding campaign is introduced through online platforms and starts collecting the
money, such business projects and ideas become less and less interesting to traditional investors
and angels.
Table 2. Fraction of equity crowdfunding campaigns getting venture capital or business angel
funding before, during, and after the campaign (2011–2015)
Source: Hornuf and Schmitt (2016)

30
In alignment with the literature being reviewed previously, the success of the crowdfunding
campaigns depends on its duration. Table 3 lists several start-ups that must exit after engaging in
equity crowdfunding in Germany between 2011 and 2015. Accordingly, it is consistent across
failure cases that all of them existed after a quite long span, implying that the unsuccessful
campaign lasted very longer with at least nearly a year. It is shown from this table is when the
campaign period becomes longer, the number of investors does not increase according to the
extended duration. For example, Smarchive start-up that lasted 11 months received money from
totally 144 investors but Bloomy Days that lasted 22 months, doubling duration of Smarchive,
only got 175 investors and LeaseRad (35 months, tripping Smarchive) and Cashboard (30 months,
almost trebling Smarchive) only caught totally 174 and 137 funders, respectively. This appears to
imply that longer period of time is ineffective for equity-based crowdfunding campaigns, which is
commensurate with the reviewed literature in the previous chapter.
Table 3. Exit for equity crowdfunding market in Germany between 2011 and 2015
2011-2015 period in Germany witnessed a high portion of successful crowdfunding campaigns
that were funded (as compared with not funded campaigns, see Figure 10). This indicates a high
successful rate for equity crowdfunding campaigns in the context of Germany. Consistent with
theorizing the role of provision of information, Hornuf and Schmitt (2016) provide the explanation
for this impressive successful rate in Germany based on its national culture. That is, Germans
generally strive for perfectionism and precision, and this focus on precision means that funders
expect to have access to the full details and provision of all related information, such as financial
facts about the venture, before making the decision. Therefore, entrepreneurs were indirectly

31
forced to provide updated information regarding the project progression on the regular basis
(Hornuf and Schmitt, 2016). Also, the percentage of dissolved and/or insolvent cases is also very
low as can be seen from Figure 10, which implies that equity-based crowdfunding campaigns in
Germany have great chance of success.
Figure 10. German dissolved and insolvent equity crowdfunding campaigns (2011–2015)
Figure 11 presents some global popular portals for equity-based crowdfunding. Consistent with
Figure 4, WeFunder and StartEngine from the US are prominent platforms for equity-based
crowdfunding. In addition, SeedInvest, MicroVentures, MrCrowd and NextSeed are other popular
portals from the US. In a nutshell, it is not surprising that US-based platforms remain most
prevalent in equity crowdfunding and the US hence still holds its distinct competitive edge in this
promising financial industry given the fact that most of online platforms for crowdfunding are US-
based.
Figure 11. Leading portal for equity-based crowdfunding
Source: FundWisdom (2019)

32
4.2. Discussion
In general, there is a consistency between theory and practice from what have been analyzed in the
above sections. Literature highlights the importance of geography in determining the success of
equity-based crowdfunding (Burtch, Ghose, and Wattal, 2012) and empirical data have shown that
the country of origin and the locational base of the platforms are important to equity crowdfunding
activities. For example, China is the largest market for equity crowdfunding while the US has
distinct advantages in terms of technology as most of current online equity crowdfunding platforms
are from the US. Also, it has been confirmed in this chapter that longer period of time does not
work, that is, long duration for equity-based crowdfunding campaigns appears ineffective as
shorter period for running the campaign could actually attract more funders, which is congruent
with the argument made by other researchers (Lukkarinen et al., 2016; Mollick, 2014). Moreover,
the provision of financials has proven to be a critical condition for successful equity crowdfunding,
which is empirically tested in the context of Germany. This is then aligned with the previous
literature that states that the provision of financial information helps to improve the
understandability as one critical successful factor for crowdfunding campaigns (Mollick, 2014).
On the flipped side of the coin, however, due to the limitations of secondary data, the role of
networks and sustainable focus in driving the success of equity-based crowdfunding remain
unfortunately empirically untested in this chapter.

33
CHAPTER 5. CONCLUSION
This final chapter focuses on wrapping this dissertation paper up. Based on the empirical results
revealed in the previous chapter, this chapter highlights the implications derived from this research
work for both theory and practice. It first summarizes the key findings in this dissertation and then
indicates the theoretical contributions to the current research on crowdfunding, and more
importantly suggests managerial recommendations to both entrepreneurs and crowdfunding
platforms for successfully implementing equity crowdfunding campaigns. The end of this chapter
addresses several drawbacks together with directions for future improvements.
5.1. Theoretical Implications
Since crowdfunding is a relatively new and emerging financing and business phenomenon, there
is a shortage of theories on this phenomenal growth (Lukkarinen et al., 2016). In fact, little research
has been conducted to understand this financial phenomenon and a holistic understanding of this
new form of entrepreneurial finance remains largely scant and missing from the current research
(for review, see Mochkabadi and Volkmann, 2018). In other words, in spite of ongoing and
growing scientific conversations, the extant body of literature on equity crowdfunding is still infant
and the scholarly knowledge of this financial phenomenon remains widely little and fragmented
and seems to fail to provide a complete picture of equity crowdfunding (Mochkabadi and
Volkmann, 2018). This lack of comprehensive knowledge motivates more empirical studies and
opens direction for further endeavors. As such, the major contribution of the present paper is to
partially fulfill this literature gap. By addressing this research paucity, this study is one among
initial papers that empirically address this interesting financial phenomenon. Also, as compared to
past studies that only focused on purely describing this phenomenon (e.g. Vulkan, Åstebro, and
Sierra, 2016) or addressing it from political and legal point of view (e.g. Cumming, Meoli, and
Vismara, 2018), this study provides a fresh and holistic perspective on this financing phenomenon
by addressing its importance in financing start-ups and small-scale ventures as well as
investigating the successful determinants of equity crowdfunding campaigns.
5.2. Key Findings and Recommendations

34
Equity crowdfunding is one of the latest trends in entrepreneurial finance, in which investors, who
are normally the public, wish to fund a new product offerings and/or a novel business idea in the
early stages while do not directly engage in pre-purchase of the product in exchange for ownership
and share if the business can operate productively and profitably. This means that funders
participate in the future cash flows of the venture under this equity crowdfunding form. However,
as this current study is focused on addressing the successful factors for equity crowdfunding, the
managerial recommendations are not for funders but instead for entrepreneurs to build a successful
campaign. Because equity-based crowdfunding offers an alternative form to financing the business
without the costly involvement of intermediaries (Vismara, 2016), this cost-effective method
should be largely encouraged by small businesses and start-ups. The results ultimately reveal that
equity-based crowdfunding has grown immensely among entrepreneurship community since the
past few years and there are many successful factors that have accounted for the growth of this
financial process. While business tycoons and larger companies have also engaged in equity-based
crowdfunding (Moritz and Block, 2016), entrepreneurs have to approach and deploy this financial
form differently given their more restricted resources and must carefully consider a number of
following factors to ensure a successful campaign:
First of all, it is important to set a suitable target fund based on the nature of product and
expectations. Depending on whether entrepreneurs are risk-seeking or risk-avoidant, they might
select to adopt keep-it-all model or all-or-nothing model when setting the minimal threshold for
target fund. Second, it is a useful advice that entrepreneurs should not schedule an overly long
duration for the campaign because it has been empirically proven in this paper that long period is
very ineffective and longer span does not result in higher number of investors and large amount of
fund. Third, a focus on sustainability would be an appealing characteristic that should be taken
into account, the business proposal and business plan in this regard can emphasize the “paperless”
approach that highlights the commitment to sustainable practice to attract investors as most of
contemporary ventures now place a heavy part on sustainable orientation to secure a success
(Bento, Gianfrate, and Thoni, 2019). Third, social media sites (e.g. LinkedIn) should be used
wisely as an effective marketing channels that connect entrepreneurs with the online public and
other peers because social media-mediated interactions help to promote the project and more
importantly strengthen the closeness between online funders and business owner to seek more
funds. Fourth, keeping the funders posted with the project progress as well as providing updated

35
information on regular basis are critical during the course of the campaign because this enhances
the trust and gives more related information to encourage the investments. Finally, it is
recommended that entrepreneurs choose US-based platforms for equity crowdfunding because
these platforms are technologically driven, safe and have high degree of transparency, which have
been widely trusted by many global start-ups as indicated in this report.
5.3. Limitations and Directions for Future Research
Without compromising what have been achieved in this dissertation work, it remains critically
important to acknowledge several limitations that exist in this paper, which provides the direction
for improvements in future research. These are discussed as below:
First, this current research paper is mainly focused on the descriptive purpose, which is aimed at
describing the practice of equity crowdfunding and its successful drivers for small firms, the scope
of this research is therefore quite broad. Although this broad spectrum allows us to increase the
study generalization or external validity, the findings must be applicable to each single case (e.g.
a particular company) or particular context (e.g. a specific market) with a certain degree of caution.
This is because the success of equity-based crowdfunding is very contextual and depends on many
situational factors, such general results here might not accurately be applied to all enterprises and
across different contexts (Lukkarinen et al., 2016). Future researchers might want to narrow down
the scope to specifically focus on an enterprise or a single marketplace, which is expected to
produce more relevant outcomes.
Second, crowdfunding activities must be subject to the local legal body but this study does not
consider the role of legal framework when considering the success for an equity crowdfunding
campaign. Recently, there has been a call from policy makers and law makers for more strictly
governing and regulating crowdfunding activities given their impact on the financing market
(Hornuf and Schwienbacher, 2017). Therefore, this missing element should be addressed by future
researchers by further taking the role of legal component into account.
Third, with the concentration on descriptive design, this study implemented a combination of both
qualitative method and quantitative method and thus acquired both non-numerical information and
numerical information from various Internet-based secondary sources so as to resolve two main

36
research questions. Broadly, former papers in the stream of equity crowdfunding have
implemented both quantitative statistical method (e.g. Hornuf and Schwienbacher, 2018) and
qualitative interview method (e.g. Estrin, Gozman, and Khavul, 2018) but experimental methods
have not been emplto investigate this financial phenomenon. Future researchers are therefore
encouraged to overcome this by undertaking more experimental studies using field observational
data from the crowdfunding platforms to better understand the “causal” impact of those
antecedents that have been reviewed in this paper on equity-based crowdfunding success.
Finally, because the scope of this research has solely targeted start-ups and small enterprises,
whether the successful determinants identified in this report are also appropriate for large-scale
companies is doubted. In other words, this study has yet to examine the case of large businesses in
relation to equity crowdfunding, given the limited research scope. As part of future research,
perhaps researchers can advance this promising area of research by conducting comparative
research in order to compare successful crowdfunding factors between small businesses and large
ones.

37
REFERENCES
Ahlers, G.K., Cumming, D., Günther, C. and Schweizer, D. (2015) Signaling in Equity
Crowdfunding, Entrepreneurship Theory and Practice, 39(4), pp. 955-980.
Angerer, M., Brem, A., Kraus, S. and Peter, A. (2017) Start-up funding via equity crowd funding
in Germany: A qualitative analysis of success factors, The Journal of Entrepreneurial Finance,
19(1), pp. 1-34.
Babbie, E (2012) The Practice of Social Research. 13th ed. Boston: Cengage Learning.
Beins, B.C. (2017) Research method: A tool for life. Cambridge: Cambridge University Press.
Belleflamme, P., Lambert, T. and Schwienbacher, A. (2013a) Crowdfunding: Tapping the Right
Crowd, Journal of Business Venturing, 29(5), pp. 585-609.
Belleflamme, P., Lambert, T. and Schwienbacher, A. (2013b) Individual crowdfunding practices.
Venture Capital, 15(4), pp. 313-333.
Bento, N., Gianfrate, G. and Thoni, M.H. (2019) Crowdfunding for sustainability ventures,
Journal of Cleaner Production, 237, 117751.
Block, J., Hornuf, L. and Moritz, A. (2017) Which updates during an equity crowdfunding
campaign increase crowd participation? Small Business Economics, 50(1), pp. 3-27.
Brian, T. (2019) EQUITY CROWDFUNDING ANALYSIS H1 2019. Available from:
https://fundwisdom.com/article/brian-thopsey/equity-crowdfunding-analysis-h1-2019 [Accessed
25 July 2020].
Brian, T. (2020) 2019 US Equity Crowdfunding Stats – Year in Review. Available from:
https://crowdwise.org/funding-portals/2019-equity-crowdfunding-stats-data/ [Accessed 25 July
2020].
Burtch, G., Ghose, A. and Wattal, S. (2012) An Empirical Examination of the Antecedents and
Consequences of Investment Patterns in Crowd-Funded Markets, SSRN Electronic Journal.

38
Cai, W., Polzin, F. and Stam, E. (2019) Crowd funding and Social Capital: A SystematicLiterature
Review. SSRN 3361748.
Creswell, J.W. and Poth, C.N. (2016) Qualitative inquiry and research design: Choosing among
five approaches. Thousand Oaks: Sage publications.
Cumming, D., Meoli, M. and Vismara, S. (2018) Does equity crowd funding democratize
entrepreneurial finance? Small Business Economics, pp. 1-20.
Ding, Z., Sun, S.L. and Au, K. (2014) Angel investors’ selection criteria: A comparative
institutional perspective, Asia Pacific Journal of Management, 31, pp. 705-731.
Ellman, M. and Hurkens, S. (2019) Fraud tolerance in optimal crowdfunding, Economics Letters,
181, pp. 11-16.
Estrin, S., Gozman, D. and Khavul, S. (2018) The evolution and adoption of equity crowdfunding:
entrepreneur and investor entry into a new market, Small Business Economics, 51(2), pp. 425-439.
Herve, F., Manthé, E., Sannajust, A. and Schwienbacher, A. (2016) Investor motivations in
investment-based crowd funding. SSRN 2746398.
Helsinki, C.T. (2014) Crowdfunder Secures Europe-wide Trading Licence. Available from:
http://www.forbes.com/sites/trevorclawson/2015/04/22/helsinki-crowdfunder-secures-europe-
widetrading-licence/ [Accessed 25 July 2020].
Horisch, J. (2018) 'Think big' or 'small is beautiful'? An empirical analysis of characteristics and
determinants of success of sustainable crowd funding projects, International Journal of
Entrepreneurial Venturing, 10 (1), pp. 111-129.
Hornuf, L. and Schwienbacher, A. (2017) Should securities regulation promote equity
crowdfunding? Small Business Economics, 49 (3), pp. 579-593.
Hornuf, L. and Schwienbacher, A. (2018) Market mechanisms and funding dynamics in equity
crowdfunding, Journal of Corporate Finance, 50, pp. 556-574.

39
Hornuf, L. and Schmitt, M. (2016) Success and Failure in Equity Crowdfunding, Leibniz Institute
for Economic Research at the University of Munich, 14(2), pp. 16-22.
Hughes, J.A. and Sharrock, W.W. (2016) The philosophy of social research. Abingdon: Routledge.
Kaartemo, V. (2017) The elements of a successful crowd funding campaign: A systematic
literature review of crowd funding performance, International Review of Entrepreneurship, 15 (3),
pp. 291-318.
Kantelia, M. (2019) Funding Fairly: How Emerging Tech is Levelling the Playing Field for Asia's
SME Landscape. Available from: https://www.entrepreneur.com/article/338931 [Accessed 25 July
2020].
Kuppuswamy, V. and Bayus, B.L. (2013) Crowdfunding Creative Ideas: The Dynamics of Project
Backers in Kickstarter, SSRN Electronic Journal.
Lin, M. and Viswanathan, S. (2016) Home Bias in Online Investments: An Empirical Study of an
Online Crowdfunding Market, Management Science, 62(5), pp. 1393-1414.
Lukkarinen, A., Teich, J.E., Wallenius, H. and Wallenius, J. (2016) Success drivers of online
equity crowd funding campaigns, Decision Support Systems, 87, pp. 26-38.
Mochkabadi, K. and Volkmann, C.K. (2018) Equity crowdfunding: a systematic review of the
literature, Small Business Economics, 54(1), pp. 75-118.
Mollick, E. (2014) The dynamics of crowdfunding: An exploratory study, Journal of Business
Venturing, 29(1), pp. 1-16.
Moritz, A. and Block, J.H. (2016) Crowd funding in Europe. Cham: Springer.
Moser, A. and Korstjens, I. (2018) Series: Practical guidance to qualitative research. Part 3:
Sampling, data collection and analysis, European Journal of General Practice, 24 (1), pp. 9-18.
Pangrazio, L. (2017) Exploring provocation as a research method in the social sciences,
International Journal of Social Research Methodology, 20 (2), pp. 225-236.

40
Picardo, E. (2020) Invest Through Equity Crowdfunding: Risks and Rewards. Available from:
https://www.investopedia.com/articles/investing/102015/invest-through-equity-crowdfunding-
risks-and-rewards.asp [Accessed 25 July 2020].
Pitschner, S. and Pitschner-Finn, S. (2014) Non-profit differentials in crowd-based financing:
Evidence from 50,000 campaigns, Economics Letters, 123(3), pp. 391-394.
Piva, E. and Rossi-Lamastra, C. (2017) Human capital signals and entrepreneurs’ success in equity
crowdfunding, Small Business Economics, 51(3), pp. 667-686.
Powney, J. and Watts, M. (2018) Interviewing in educational research. Abingdon: Routledge.
P2PMarketData (2020) Crowdfunding Statistics Worldwide: Market Development, Country
Volumes, and Industry Trends. Available from: https://p2pmarketdata.com/crowdfunding-
statistics-worldwide/ [Accessed 25 July 2020].
Qiu, C. (2013) Issues in Crowdfunding: Theoretical and Empirical Investigation on Kickstarter.
SSRN Electronic Journal.
Ralcheva, A. and Roosenboom, P. (2016) On the road to success in equity crowd funding. SSRN
2727742.
Robiady, N.D., Windasari, N.A. and Nita, A. (2020) Customer engagement in online social
crowdfunding: The influence of storytelling technique on donation performance, International
Journal of Research in Marketing.
Silverman, D. (2016) Qualitative research. 3rd ed. Thousand Oaks: Sage publications.
Statista (2020a) Value of funds raised through crowdfunding worldwide from 2014 to 2016.
Available from: https://www.statista.com/statistics/360512/funds-raised-via-crowdfunding-
globally/ [Accessed 25 July 2020].
Statista (2020b) Crowdfunding market size globally 2018 and 2025. Available from:
https://www.statista.com/statistics/1078273/global-crowdfunding-market-size/ [Accessed 25 July
2020].

41
Streletzki, J.G. and Schulte, R. (2013) Which venture capital selection criteria distinguish high-
flyer investments? Venture Capital, 15(1), pp. 29-52.
Vismara, S. (2016) Equity retention and social network theory in equity crowdfunding, Small
Business Economics, 46 (4), pp. 579-590.
Vismara, S. (2019) Sustainability in equity crowdfunding, Technological Forecasting and Social
Change, 141, pp. 98-106.
Vulkan, N., Åstebro, T. and Sierra, M. F. (2016) Equity crowdfunding: A new phenomena, Journal
of Business Venturing Insights, 5, pp. 37-49.
Wallmeroth, J., Wirtz, P. and Groh, A.P. (2018) Venture capital, angel financing, and crowd
funding of entrepreneurial ventures: A literature review, Foundations and Trends in
Entrepreneurship, 14 (1), pp. 1-129.
Rainey, M., Sagalongos, S., Tansey, J. and Srivatsan, V. (2017) Equity Crowdfunding: A New
Model for Financing Start-Ups and Small Businesses. Available from:
https://static1.squarespace.com/static/598b47ff6a49631e85d75e53/t/5a20764cc8302566a3a2386
3/1512076878794/SauderS3i_Equity_Crowdfunding_FINAL.pdf [Accessed 25 July 2020].
Zheng, H., Li, D., Wu, J. and Xu, Y. (2014) The role of multidimensional social capital in
crowdfunding: A comparative study in China and US, Information& Management, 51(4), pp. 488-
496.
Zhou, M., Lu, B., Fan, W. and Wang, G. A. (2016) Project description and crowdfunding success:
an exploratory study, Information Systems Frontiers, 20(2), pp. 259-274.

Equity crowdfunding determinants of success

Recommandé

Recommandé

Contenu connexe

Similaire à Equity crowdfunding determinants of success

Similaire à Equity crowdfunding determinants of success (20)

Plus de MattThird

Plus de MattThird (9)

Dernier

Dernier (20)

Equity crowdfunding determinants of success