Crowdfunding in Europe: State of the Art in Theory and Practice (FGF Studies in Small Business and Entrepreneurship)

Crowdfunding is becoming an increasingly popular method to finance projects of every kind and scale. This contributed volume is one of the earliest books presenting scientific and research-based perspectives of crowdfunding, its development, and future. The European Crowdfunding Network (ECN) and its scientific work group, together with FGF e.V., invited both researchers and practitioners to contribute to this first state-of-the-art edited volume on crowdfunding in Europe. This book contributes to a better comprehension of crowdfunding, encourages further fundamental research and contributes to a systematization of this new field of research. The book also features expert contributions by practitioners to enhance and complement the scientific perspective. This book can be used as a guideline and shall advance classification in an emerging research field. Multifaceted and Interdisciplinary Perspectives on Small Business and Entrepreneurship Research: Introducing the FGF Studies i... 6 Preface 10 Contents 14 Introduction 16 Reference 19 Part I: Status Quo of an Emerging Research Field 20 Crowdfunding: Outlining the New Era of Fundraising 21 1 Introduction 21 2 The Crowdfunding Market 23 3 A Classification of Crowdfunding 24 3.1 Crowdfunding Principles 24 3.1.1 Project Initiators and Backers 24 3.1.2 Crowdfunding Platform 25 3.2 Crowdfunding Types 27 4 Potentials and Challenges of Crowdfunding 28 4.1 Potentials 28 4.2 Challenges 30 5 Future Research Directions 30 5.1 Backers’ Motivation 31 5.2 Project Initiators’ Motivation 31 5.3 Risk in Crowdfunding 32 5.4 Crowdfunding for Small and Medium Enterprises 33 6 Conclusion 33 References 34 Crowdfunding: A Literature Review and Research Directions 38 1 Introduction and Motivation 38 2 Review of the Scientific Literature on Crowdfunding 39 2.1 Literature Research and Selection Criteria 39 2.2 Development of Scientific Research in Crowdfunding 40 2.3 Crowdfunding Literature with a Focus on Capital Seekers 41 2.3.1 Motivations of Companies for Crowdfunding 41 2.3.2 Determining Factors for Successful Crowdfunding 45 2.3.3 Legal Framework 46 2.4 Crowdfunding Literature with a Focus on Capital Providers 47 2.4.1 Motivations of Capital Providers 47 2.4.2 Importance of Social Networks 51 2.4.3 Signals in Crowdfunding Transactions 52 2.5 Crowdfunding Literature with a Focus on the Intermediary 53 3 Summary and Open Research Questions 55 References 58 Crowd and Society: Outlining a Research Programme on the Societal Relevance and the Potential of Crowdfunding 67 1 Introducing the Topic: Financial Crisis, Societal Challenges-Assignments for Crowdfunding? 67 2 Theoretical Background 69 3 Objectives, Scope and Core Questions of the Research Programme 71 4 Method 74 5 Outlook 75 References 76 Part II: Regional Examinations on Crowdfunding 80 The Financing Process of Equity-Based Crowdfunding: An Empirical Analysis 81 1 Introduction 81 2 Current Literature 82 3 Methodology 84 4 Functionality of Equity-Based Crowdfunding 84 4.1 Application, Screening and Selection Phase 85 4.2 Contracting Phase 85 4.3 Roadshow Phase 87 4.4 Subscription Phase 89 4.5 Holding Phase 90 4.6 Exit Phase 91 5 Implications for Entrepreneurship Research 92 References 93 The Emerging Crowdfunding Market in Italy: Are ``the Crowd ́ ́ Friends of Mine? 96 1 Introduction 96 2 The Literature on ``Crowdfunders ́ ́ 97 3 Data and Empirical Strategy 99 4 Conclusions 104 References 104 Crowdfunding and Employment: An Analysis of the Employment Effects of Crowdfunding in Spain 106 1 Introduction 107 2 The ICTs-Employment Nexus 108 2.1 Crowdfunding 109 3 Methodology 111 4 Financial Crisis: Spain as a Case Study 114 5 Crowdfunding and Employment in Spain: Key Figures January 2012-January 2013 116 5.1 Key Figures January 2013-January 2014 118 6 Conclusions 120 References 122 Non-equity Crowdfunding as a National Phenomenon in a Global Industry: The Case of Russia 124 1 Introduction 124 2 Russian Crowdfunding Development and Comparison with International Platforms 125 3 Global Trends on Russian National Platforms 128 4 Future of Russian Non-equity Crowdfunding 129 5 Conclusion 131 References 131 Institutions Influencing the Evolution of Crowdfunding in China: A Review of the World Bank Report on Crowdfunding ́s Potential... 133 1 WBRC ́s Key Variables for Crowdfunding Engagement 134 2 Mistakes and Contradictions Within the WBRC 135 3 Institutions Influencing the Evolution of Crowdfunding in China 136 4 Conclusion 138 References 138 Part III: Analysis of Specific Application Areas in Crowdfunding 140 The Perfect Regulation of Crowdfunding: What Should the European Regulator Do? 141 1 Introduction to Crowdfunding 141 2 What Is Crowdfunding? 142 3 Crowdfunding Offerings Under (European) Securities Laws 143 4 Pitfalls for Crowdfunding Offerings: National Company Laws 145 4.1 Public Offering Limitations by National Company Laws 145 4.2 Formalities Imposed by National Company Laws 146 5 Crowdfunding Platforms Under (European) Securities Laws 146 5.1 Accepting Reclaimable Funds (CRD IV, E-Money Directive) 148 5.2 Continued Ownership (UCITSD, AIFMD, VC-Regulation, EU-SEF-Regulation) 149 5.3 MiFID Regulated Activities 150 6 Towards a European Regulatory Proposal 152 6.1 The Lack of Investor Information, Exit, Voice and Loyalty 152 6.2 A European Legislative Proposal 154 6.2.1 Restrictions on the Offering 156 6.2.1.1 Disclosure 157 6.2.1.2 Maximum Cap per Project and Participation 158 6.2.1.3 Self-Certification 159 6.2.1.4 Proposal? 162 6.2.2 Light Company Law Structures 163 6.2.3 Restrictions on Crowdfunding Sites 164 6.2.3.1 Licensing/Registration Requirements 164 6.2.3.2 Business Organisation 167 6.2.3.3 Towards a Cross-Border Dimension for (Equity) Crowdfunding Platforms 168 7 Conclusion 170 References 170 Impact of Debt Crowdfunding for Civic Projects on the Optimal Portfolio of a Socially Responsible Investor 172 1 Introduction 172 2 Methodology 173 3 Optimal Portfolio Without Crowdfunding 174 4 Optimal Portfolio with Crowdfunding 175 5 Discussion of the Results 176 6 Conclusion 177 References 178 What Makes Crowdfunding Projects Successful `Before ́ and `During ́ the Campaign? 179 1 Introduction 180 2 Research Question 181 3 Database and Sampling 181 4 Variables 182 4.1 Campaign Descriptive Variables 182 4.2 Product Related Variables 182 4.3 Offer Related Variables 185 4.4 Entrepreneur Related Variables 186 4.5 Networking Variables 187 5 The Analysis 187 5.1 First Step: Logistic Regression on Ex-Ante Variables 187 5.2 Second Step: Mediation Model on Ex-Ante Variables 190 6 Conclusions 194 References 195 Limitless Crowdfunding? The Effect of Scarcity Management 197 1 Introduction 197 2 The Theoretical Effect 198 3 The Empirical Effect 200 3.1 Sample Description 200 3.2 Analysis 201 3.3 Results 201 4 Conclusions 202 References 203 Equity Crowdfunding: Beyond Financial Innovation 204 1 Introduction 204 2 Other Patterns Involved in Equity Crowdfunding 206 3 Conclusion 209 References 210 Part IV: Selected Case Studies on Crowdfunding Practice 212 The Crowdpower 2.0 Concept: An Integrated Approach to Innovation That Goes Beyond Crowdfunding 213 1 Introduction 213 2 Crowd Innovation Basics 214 3 The Crowdpower 2.0 Concept 215 4 Crowdpower 2.0 in Practice 216 4.1 An Example of a Crowdsourcing Platform Supporting the Crowdcreativity Phase 217 4.2 An Example of an Austrian Crowdfunding Initiative 218 5 Crowdpower 2.0: Best Practices 221 References 223 Crowdfunding of a Social Enterprise: The GloW Project as a Case Study 224 1 Introduction 225 1.1 Definitions, Models and Facts 225 1.2 Crowdfunding and Traditional Financing 226 1.3 Crowdfunding: A New Hope for Social Enterprises 227 1.4 Regulations of CF Industry Favourable for SEs 228 2 The GloW Project and Crowdfunding 229 2.1 The GloW Project 229 2.2 Crowdfunding of the GloW Project 230 2.3 Analysis of the Crowdfunding Campaign 233 3 Conclusions 238 References 239 The Ten Commandments of Crowdfunding 241 1 How to Determine if Crowdfunding Matches Potential Project Leaders ́ Interests 241 2 The Self-Assessment Approach of The Ten Commandments of Crowdfunding 243 3 The Decision to Use Crowdfunding 247 References 248 About the Editorial Board and the Editors 249 Editorial Board 249 Editors 251 Front Matter....Pages i-xiv Introduction....Pages 1-4 Front Matter....Pages 5-5 Crowdfunding: Outlining the New Era of Fundraising....Pages 7-23 Crowdfunding: A Literature Review and Research Directions....Pages 25-53 Crowd and Society: Outlining a Research Programme on the Societal Relevance and the Potential of Crowdfunding....Pages 55-67 Front Matter....Pages 69-69 The Financing Process of Equity-Based Crowdfunding: An Empirical Analysis....Pages 71-85 The Emerging Crowdfunding Market in Italy: Are “the Crowd” Friends of Mine?....Pages 87-96 Crowdfunding and Employment: An Analysis of the Employment Effects of Crowdfunding in Spain....Pages 97-114 Non-equity Crowdfunding as a National Phenomenon in a Global Industry: The Case of Russia....Pages 115-123 Institutions Influencing the Evolution of Crowdfunding in China: A Review of the World Bank Report on Crowdfunding’s Potential for the Developing World....Pages 125-131 Front Matter....Pages 133-133 The Perfect Regulation of Crowdfunding: What Should the European Regulator Do?....Pages 135-165 Impact of Debt Crowdfunding for Civic Projects on the Optimal Portfolio of a Socially Responsible Investor....Pages 167-173 What Makes Crowdfunding Projects Successful ‘Before’ and ‘During’ the Campaign?....Pages 175-192 Limitless Crowdfunding? The Effect of Scarcity Management....Pages 193-199 Equity Crowdfunding: Beyond Financial Innovation....Pages 201-208 Front Matter....Pages 209-209 The Crowdpower 2.0 Concept: An Integrated Approach to Innovation That Goes Beyond Crowdfunding....Pages 211-221 Crowdfunding of a Social Enterprise: The GloW Project as a Case Study....Pages 223-239 The Ten Commandments of Crowdfunding....Pages 241-248 Back Matter....Pages 249-251