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Crowdfunding of Small Entrepreneurial Ventures


Armin Schwienbacher


Univ. Lille Nord de France - SKEMA Business School

Benjamin Larralde


Universite du Luxembourg

September 28, 2010

HANDBOOK OF ENTREPRENEURIAL FINANCE, Oxford University Press, Forthcoming

Abstract:     
An inherent problem that entrepreneurs face at the very beginning of their entrepreneurial initiative is to attract outside capital, given the lack of collateral and sufficient cash flows and the presence of significant information asymmetry with investors. Recently, some entrepreneurs have started to rely on the Internet to directly seek financial help from the general public (the “crowd”) instead of approaching financial investors such as business angels, banks or venture capital funds. This technique, called “crowdfunding”, has made possible to seek capital for project-specific investments as well as for starting up new ventures.

In this book chapter (forthcoming in the Handbook of Entrepreneurial Finance at Oxford University Press), we discuss crowdfunding as an alternative way of financing projects, with a focus on small, entrepreneurial ventures. We provide a description of crowdfunding and discusses existing research on the topic, putting crowdfunding into perspective of entrepreneurial finance and thereby describing factors affecting entrepreneurial preferences for crowdfunding as source of finance. We elaborate different business models used to raise money from the crowd, in particular with respect to the structure of the crowdfunding process. Building on this discussion, we present and discuss extensively a case study, namely Media No Mad (a French startup). Finally we conclude with recommendations for entrepreneurs seeking to make use of crowdfunding and with suggestions for researchers about yet unexplored avenues of research.

Number of Pages in PDF File: 23

Keywords: crowdfunding, entrepreneurial finance, social networks

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Date posted: October 30, 2010  

Suggested Citation

Schwienbacher, Armin and Larralde, Benjamin, Crowdfunding of Small Entrepreneurial Ventures (September 28, 2010). HANDBOOK OF ENTREPRENEURIAL FINANCE, Oxford University Press, Forthcoming. Available at SSRN: http://ssrn.com/abstract=1699183 or http://dx.doi.org/10.2139/ssrn.1699183

Contact Information

Armin Schwienbacher (Contact Author)
Univ. Lille Nord de France - SKEMA Business School ( email )
Lille
France
Benjamin Larralde
Universite du Luxembourg ( email )
Luxembourg
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