Crowdfunding Social Ventures: A Model and Research Agenda

Abstract

Crowdfunding (CF) in a social entrepreneurship context is praised in narrations for its multifaceted potential - to access much needed financial resources, to gain legitimacy through crowd participation, and to further tap the crowd as a resource for numerous activities of the venture. From an academic point of view however, little has been written about CF as a whole, and inquiries from the social entrepreneurship sphere are so far mostly concerned with CF donations. In order to overcome the scarcity of the resource ‘crowd’ being asked for gifts, new approaches, including tailored reward systems, more structured bond-like investments and equity based CF are experimented with. Finance literature scarcely addresses these new forms, and no article so far shows concern for the idiosyncrasies of social ventures and the differing rationale of the social entrepreneurs and investors in CF activities.

This paper thus sets out to first review existing literature on financing social ventures as well as on crowdfunding. Based upon the findings, the author subsequently draws up an early scheme of CF in order to structure future inquiries and to provide a common ground for discussion. Based upon the two streams, and in reflection to perspectives from traditional finance, a research agenda of eight themes for CF of social ventures is set up. The themes proposed are: investor types and utility-functions; corporate governance and structure in CF ventures; investor relations, risk and disclosure; applications and comparative approaches; network tie formation; legitimacy, institutions and democracy; challenging finance metrics; and legal and regulative hurdles for equity and debt CF.

Keywords: Crowd, Funding, Financing, Social, Ventures, Entrepreneurship, Investor-relations

JEL Classification: G24, L14, L26, M13, M14