Crowd(fund)ing at the gates? Toward a gatekeeper theory of dual value creation

Abstract

Providers of financial capital play an integral role in the entrepreneurial process: as gatekeepers. This means on one hand, financiers provide capital to resource- constrained enterprises and make possible activities that otherwise would not occur. On the other hand, they also withhold funds from enterprises they deem unlikely to yield success and instead allocate resources to firms that appear to capitalize on promising opportunities in the marketplace. This theoretical paper explores this gatekeeper role and argues some resource providers are better at screening for economic value creation while others are better suited to screening for social value creation. This gatekeeper model is then applied to a novel new source of financial capital - crowdfunding - which provides an interesting context to explore the changing nature of entrepreneurial finance.