Leveraging social networks for offline crowdfunding in rural communities

Abstract

Purpose<br/> As a result of the US JOBS Act, Regulation Crowdfnding went into effect in June of 2017, allowing non-accredited investors in the US for the first time to purchase securities in local start-ups. Ahead of the JOBS Act, Kansas established its own intrastate initiative in 2011, known as the Invest Kansas Exemption (IKE, 2011). The purpose of this paper is to explore how IKE participants describe the social and communal impact on their community crowdfunding success.<br/> Design/methodology/approach<br/> For this qualitative case study, we interviewed start-up businesses, economic champions, and SEC representatives in Kansas to determine the importance of social networks for entrepreneurs in offline community public offerings, what projects are fundable, and who to tap for capital and how to tap them.<br/> Findings<br/> Leaning heavily on social capital theory (Davidsson & Honig, 2003; Lin, Ensel, & Vaughn, 1981), we find that a successful community crowdfunding campaign requires community connections, economic champions, destination businesses, forward-thinkers, return to the community, and transparency.<br/> Limitations<br/> While the federal JOBS Act will present future opportunities for research, this study aimed to find social motivations behind participating in a regulation crowdfunding campaign, and is limited to participants in one US state.<br/> Implications<br/> The study provides insight into the social and communal aspect of crowdfunding investors, helping to expand further academic understanding of social capital as it pertains to business start-ups.<br/> Contribution<br/> This original study should be of broad interest to the social business academic community interested in understanding the social motivations of investing in a microlending campaign, as well as of practical relevance to entrepreneurs, and to community leaders who may seek those investors.