Abstract

AbstractDigital technologies are transforming entrepreneurial finance. Near-ubiquitous access to the Internet, platformisation, and advances in cloud computing, machine learning and artificial intelligence, and blockchain are changing the sources, basis, and quantum of funding in ways that were unimaginable at the turn of the century. This chapter outlines the changes to the market for entrepreneurial finance from the perspective of structure and participants. The key sources and characteristics of alternative sources of finance available to entrepreneurs, including start-ups, are presented. Two online alternative finance sources, crowdfunding and token offerings, are discussed in greater detail. These are illustrated with case studies. This chapter concludes with recommendations and a discussion of practical implications.

Highlights

  • Entrepreneurs are typically defined by their risk taking, innovation, and opportunity-seeking behaviour (Wennekers and Thurik 1999)

  • While entrepreneurs and SME owners report that credit conditions have improved in recent years, they report that access to finance is a major concern (OECD 2019)

  • 3.1.3 Case Study: Jolla—The Power of the Crowd In February 2010, Intel and Nokia merged their efforts to develop a Linux-based mobile operating system (OS), MeeGo, and agreed to work together to drive a broad ecosystem of partners (Grabham 2010). This partnership seemed to make progress, attracting companies like Novell, AMD and Aminocom to the MeeGo development effort. This all came to a shuddering stop exactly one year later when Nokia abandoned the partnership to switch to Windows Phone 7 (Reuters 2011)

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Summary

Introduction

These technologies are changing how entrepreneurs access funding and from whom. The remainder of this chapter outlines the changing landscape of entrepreneurial finance and discusses two Internet-enabled sources of entrepreneurial finance in greater detail—crowdfunding and token offerings. These are illustrated with two case studies on Jolla Software and AspenCoin. The former raised over US$1.8 million from over 13,000 contributors in 21 days using the IndieGoGo crowdfunding platform (Jolla 2014c), while the latter raised over US$18 million through a security token offering (Carroll 2018b). The chapter concludes with a summary of the key takeaways for entrepreneurs

The New Alternatives for Entrepreneurial Finance
The Digital Alternatives
Equity, Reward, and Donation Crowdfunding
Peer-to-Peer
Case Study
Initial Coin Offerings
Security Token Offerings
Findings
Conclusion
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