Choosing crowdfunding: Why do entrepreneurs choose to engage in crowdfunding?

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From: Technovation(Vol. 111)
Publisher: Elsevier Science Publishers
Document Type: Report; Brief article
Length: 275 words

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Abstract :

Keywords Crowdfunding; Entrepreneurship; Finance; Life cycle; Motivation Highlights * Entrepreneurs are motivated to employ crowdfunding by the need to raise capital, the aim of raising awareness, or as a means of gaining validation. * Crowdfunding is rarely a last resort but rather an additional tool that entrepreneurs employ to develop, market, and validate their ideas. * Entrepreneurs motivated primarily by the need to raise capital tend to employ crowdlending, whereas entrepreneurs motived by building awareness or seeking validation tend to employ rewards-based crowdfunding. * The use of crowdfunding by early-stage start-ups is motivated by a desire to generate awareness or validate a business idea, while mature start-ups employ crowdfunding as a means to raise capital. Abstract As crowdfunding becomes an increasingly common source of financing for a diverse range of entrepreneurs, this paper seeks to add to the literature by qualitatively exploring why entrepreneurs choose to engage in crowdfunding. We find that entrepreneurs often engage in crowdfunding as a first resort with three distinct motives; to raise capital, to validate a business idea, or to create brand awareness. Especially reward-based crowdfunding is often seen as a tool for validate a business idea or generating awareness not as a source of finance. Finally we observe that entrepreneurs' motives for engaging in crowdfunding often correlate with their maturity and thus motivations for engaging in crowdfunding shift as they mature. Author Affiliation: Copenhagen Business School, Department of Management, Society, and Communication, Dalgas Have 15, 2000, Frederiksberg, Denmark * Corresponding author. Article History: Received 27 February 2020; Revised 18 June 2021; Accepted 28 August 2021 Byline: Louise Bech Junge [lbj@crowdnerds.dk], Iben Cleveland Laursen [Iben@nomas.dk], Kristian Roed Nielsen [krn.msc@cbs.dk] (*)

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Gale Document Number: GALE|A695941157