Exploring and comparing the impact of reward crowdfunding and equity crowdfunding on company performance
Exploring and comparing the impact of reward crowdfunding and equity crowdfunding on company performance
Ciro Troise , Elena Candelo, Diego Matricano, Mario Sorrentino
Crowdfunding is a new opportunity for entrepreneurs to raise capital from non-professional investors. In the last few years, crowdfunding has experienced a high growth rate, and its global market will expect significant numbers in the coming years (Massolution, 2016; World Economic Forum, 2016; Technavio, 2018; Politecnico di Milano, 2019). Being one of the most important new players that entered the entrepreneurial arena (Block et al., 2018a: 240), crowdfunding is becoming more and more a popular financing choice among innovative start-ups (Macht and Weatherston, 2014; Vismara, 2016; Oo et al., 2019; Ralcheva and Roosenboom, 2019)
Among the crowdfunding models (i.e. donation, lending, reward, equity), the equity-based crowdfunding (ECF hereafter) (Ahlers et al., 2015; Vismara, 2016) and the reward-based crowdfunding (RCF hereafter) (Mollick, 2014; Koch et al., 2019) are considered the main financing alternative for startups to traditional funding sources – such as Venture Capitalists (VCs hereafter) and Business Angels (BAs hereafter). The differences between ECF and RCF are well known. According to Ahlers et al. (2015: 958), “Equity crowdfunding is a method of financing, whereby an entrepreneur sells a specified amount of equity or bond-like shares in a company to a group of (small) investors through an open call for funding on Internet-based platforms”. With regard to RCF, Belleflamme et al. (2014: 588) argued that it “involves an open call, mostly through the Internet, for the provision of financial resources either in the form of donation or in exchange for the future product or some form of reward to support initiatives for specific purposes”. According to Davis et al. (2017: 90), “Rewards-based crowdfunding enables entrepreneurs to garner funds in support of a specific purpose, which often centers on the development or distribution of a new, unfinished, or unproven product”.
#company growth #crowdfunding #entrepreneurs #innovation capability #reward; equity