The entrepreneur's perspective on crowdfunding as an equity access mechanism

Abstract

Until recently equity funding access has been exclusively available to a select few. Among those excluded are entrepreneurs who have the potential of impacting the growth of an economy. This study explores the emerging equity crowdfunding phenomenon using mechanism design theory to understand if and how it can be used to fill the funding gap experienced by entrepreneurs. The study is both exploratory and descriptive in nature. A mixed research design method was followed. In particular, a convergent parallel design, where qualitative and quantitative samples collected independently were merged during the results and analysis stages.

Findings reveal that equity crowdfunding improves the fund raising component of investments in private markets. A more diverse number of participants are engaging in these platforms than initially envisaged and using them for purposes other than what they were initially designed. Automated screening, performance reporting, mentorship, mergers and acquisitions, funding companies in developing countries are some of the different uses emerging. Strong headways are being made on accounting support and administration and communication for increased value add that investors can make, supporting the developments on the legal front as well.