Success factors in reward based and equity based crowdfunding in Finland

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School of Business | Master's thesis
MSc program in Information and Service Management
MSc program in Information and Service Management
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Finding funding is a key hurdle for small ventures and businesses. Crowdfunding has emerged as an alternative option alongside traditional funding options in the past decade. Crowdfunding refers to soliciting funds from a large group of people often through the Internet. The raised capital is often formed from numerous small contri-butions. In academic literature both entrepreneurs and funders were found to have heterogenic motivations for participating in crowdfunding. Entrepreneurs partake in order to raise funds for their business as well as to find validation for ideas and to verify demand for their offering. Funders' motivations for contributing to crowdfunding include supporting a cause or seeking financial returns. Crowdfunding projects have been found to fall into four models: donation, reward, lending and equity based crowd-funding - based on the type of compensation funders receive for their contribution. Earlier research indicates that project type, entrepreneur background, social network, timing and duration, information sharing, geography and other crowdfunding pro-jects all affect the success of crowdfunding initiatives. A study aimed at identifying success factors in crowdfunding in a Finnish setting was conducted in this Thesis using data from online sources and five interviews. Inter-views were held with three reward-based and two equity-based crowdfunding entre-preneurs. The study results support especially indications that project type, social networks and information sharing impact the success of a crowdfunding project. Contrarily, entrepreneur background did not seem to affect crowdfunding success as much as previously thought. By utilizing a wide social network and providing a captivating narrative, entrepre-neurs can attract interest in their crowdfunding project. Herding behavior of funders can draw in further contributions, increasing the success rate of the crowdfunding project.
crowdfunding, social network, crowdfunding project, funder motivation
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