Why German Entrepreneurs Seek Equity via Crowdfunding

Abstract

Equity crowdfunding, financing a project or venture through many small investments of a large group of investors, has received growing attention from the media and scholars. This study focuses on what motivates entrepreneurs to crowdfund in Germany. The study researched the motivation of 11 entrepreneurs to use German equity crowdfunding platforms. This study uses a research approach novel in the field of venture financing, the means-end approach. One of the findings is that entrepreneurs use equity crowdfunding to successfully collect funds from rather emotionally investing crowdinvestors to finance their ventures’ future growth and to signal investment viability to follow-up investors. Crowdfunding also allows entrepreneurs to keep decision-making power over the venture better than by using traditional sources of funding. The findings indicate that crowdfunding attracts entrepreneurs who could not secure funding from other sources of capital as well as entrepreneurs who see the additional benefits it can provide over other sources