Crowdfunding: An Exploratory Study on Knowledge, Benefits and Barriers Perceived by Young Potential Entrepreneurs

Abstract

Crowdfunding (CF) has experienced impressive growth in recent years with the development of internet and information technologies that increased the participation of the “crowd” to fund entrepreneurial projects. Young entrepreneurs, especially well-qualified students, have recently begun to play a new role in the economy by launching new ventures in niche markets. The aim of the present paper is to provide a deeper understanding of CF among Portuguese young potential entrepreneurs as an alternative funding mechanism, by discussing its main characteristics and the perceived benefits and barriers that might drive young entrepreneurs to post a project on a CF platform or discourage its use. Through an online survey, we query well-qualified students about the knowledge they have about crowdfunding and benefits and barriers that can increase or reduce the possibility of funding to launch a new venture. The results show that potential young entrepreneurs have moderate knowledge about CF. Consequently, they are not able to explore all the business models available, specifically the models related to investment (lending and equity). The respondents perceive several benefits of the use of CF that go beyond the financial advantages, such as the communication of the project to a wider audience and the additional feedback from potential customers. The perceived barriers that could deter the use of CF are related to the implementation of the CF campaign, although contextual constraints have been mentioned.

Predictions of Crowdfunding Campaign Success: The Influence of First Impressions on Accuracy and Positivity

“…Furthermore, Kuppuswammy and Roth (2016) found evidence that successful crowdfunding has a positive effect on the creator receiving additional financing. Moreover, crowdfunding campaigns provide valuable information about demand for the product, service, or project, and can serve as a low-cost marketing tool (Mollick 2014;Miglo 2020;Bernardino and Santos 2020). In addition, investors in crowdfunding campaigns have the opportunity to invest small amounts of money.…”

Crowdfunding and bank financing: substitutes or complements?

“…Our research question is motivated by the following. Firstly, as follows from previous paragraph, both bank loans and crowdfunding are important sources of financing for modern entrepreneurs and many businesses deal with this choice (see, e.g., Blaseg & Koetter, 2016;Xu, 2018;Xu et al, 2020;Cole et al, 2019;Bernardino & Santos, 2020). Although in some cases either a pecking order exists in a sense that entrepreneurs select crowdfunding because they were refused by a bank or a reverse pecking order where entrepreneurs select bank financing because of lack of knowledge about crowdfunding (Bernardino & Santos, 2020), in many cases this choice is not so obvious.…”

“…Firstly, as follows from previous paragraph, both bank loans and crowdfunding are important sources of financing for modern entrepreneurs and many businesses deal with this choice (see, e.g., Blaseg & Koetter, 2016;Xu, 2018;Xu et al, 2020;Cole et al, 2019;Bernardino & Santos, 2020). Although in some cases either a pecking order exists in a sense that entrepreneurs select crowdfunding because they were refused by a bank or a reverse pecking order where entrepreneurs select bank financing because of lack of knowledge about crowdfunding (Bernardino & Santos, 2020), in many cases this choice is not so obvious. There are cases where entrepreneurs explain their choice of crowdfunding by their intention of learning market feedback ("wisdom of the crowd"); in some cases they had other choices including bank loan and in some cases entrepreneurs selected a mixed financing.…”

“…as well indirect costs such as bankruptcy/liquidation costs in case the firm fails and is not able to continue its operations. 17 On the other hand, banks have greater capacity compared to most other capital providers, banks managers are able to lend large sums of money to firms if they find them financially attractive while with crowdfunding the amount of funds that can be raised during the campaign is limited (see, e.g., Bernardino and Santos, 2020;Hui et al, 2014;Durkin et al, 2016). This is because not all potential customers have access to internet; not all of them like to use internet for purchases; not of all of them are comfortable with financing innovations etc.…”

Re-Examining Crowdfunding Success: How the Crowdfunding Goal Moderates the Relationship of Success Factors and Crowdfunding Performance

“…In this context, crowdfunding platforms act as two-sided markets, connecting project founders to a potential crowd that can provide the required funding (Belleflamme et al, 2014;Belleflamme et al, 2015). The central questions for both entrepreneurs and researchers in this context is how to design a crowdfunding project and which factors hereby determine the success of a crowdfunding initiative (Bernardino & Santos, 2020;Datta et al, 2018;Janku & Kucerova;McKenny et al, 2017;Short et al, 2017;Xiao et al, 2014).…”