Abstract
By analysing the operations of a lending crowdfunding platform in Portugal, the investigation aims to study the potential contribution of CF for entrepreneurship and regional development. The results reveal that small organisations are especially prone to use CF as a financing strategy, regardless of their seniority, as well as ventures that have a moderated risk profile. However, coastal regions have been more dynamic on CF use than interior located ventures, since most of the operations were realized on the littoral of the country. The results suggest that interior organisations that use CF could have more financing difficulties that led them to look for new fundraising solutions, since they typically have higher size than coastal located organisations, although the risk rating is quite similar. The CF loans period is also shorter. The average interest rate charged is quite similar between both type of locations, although a higher variability exists in the funding conditions of interior organisations. The average offer per investor is also higher in the interior case.
TopCrowdfunding
CF is a concept that encompasses the outsourcing of an organizational function (capital formation) to a defined network of actors (the crowd) in the form of an open call (the campaign) via dedicated CF platforms (Paschen, 2017; André et al., 2017; Belleflamme, Lambert, & Schwienbacher, 2014). In this context, a website acts as an intermediary (online platform) through which promoters of start-ups, projects or ventures advertise their business ideas and seek small amounts of money from a huge number of prospective investors (Joshi, 2018). The platform establishes the connection between entrepreneurs, who aim to raise capital, and novel investors, who form an emerging source of capital and are willing to invest through internet-based intermediaries (Valanena & Jegeleviciute, 2014).
Key Terms in this Chapter
Crowdfunder: People that offer funds to support a crowdfunding campaign, that could or not be repaid and rewarded.
Crowdfundee: Company or venture that use crowdfunding platforms for attracting funds.
Crowdfunding: Fundraising operation through which an organization asks funds through an open call directly to a large number of people (the crowd), who typically contribute with small amounts.
Crowdfunding Platforms: Digital platforms that disseminate on their website the projects that are asking funding (crowdfundees), and collect the offers made by crowdfunders. Crowdfunding platforms also defines the rules to be used in the CF operations.
Regional Development: Set of activities carried out in order to reduce social and economic inequalities between developed and less developed regions.
Entrepreneurship: Process that involves the identification and exploration of opportunities. Involves innovative models, proactiveness and risk-taking.
Lending Crowdfunding: Subtype of crowdfunding that encompasses small loans made by a large number of people (the crowd) directly to the company that asked fund through a call. The operation has a given maturity, to which the capital loan will be repaid, and involves a reward (interest rate) agreed between the crowdfunders and the crowdfundee in a peer-to-peer basis.