Equity crowdfunding: Is it really "Dumb money"? : An exploratory study on the non-financial value added by equity crowdfunding investors from Swedish entrepreneurs’ perspective

Abstract: Abstract  Background:                     In an equity crowdfunding campaign, the investor receives shares in the company in return for the investment, which makes equity crowdfunding similar to traditional sources of equity funding. Nevertheless, skeptics have referred to equity crowdfunding as “dumb money”, since it might not provide similar non-financial value added as realized from professional investors. The main literature used for the frame of reference were Boué (2007), Macht and Robinson (2008) and Macht and Weatherston (2014). The literature worked as a basis for deriving a table, outlining the non-financial value added received by venture capitalists and business angels, as well as showing where literature is lacking regarding non-financial value added by equity crowdfunding investors. Purpose: The purpose of this thesis was to explore the non-financial value added by equity crowdfunding investors to the entrepreneur. This purpose was answered by two research questions: (1) Do equity crowdfunding investors provide similar non-financial value added to the entrepreneur as traditional equity funding investors do? (2) Are there any additional non-financial value added realized from equity crowdfunding? Method: This thesis follows the interpretivist research paradigm and undertakes an abductive research approach in order to explore the purpose. Primary data was collected through semi-structured interviews with seven entrepreneurs who had successfully conducted an equity crowdfunding campaign in Sweden. Secondary data was collected from peer-reviewed articles containing relevant theories and models. Conclusion: This research suggests that there are similarities between professional investors and equity crowdfunding investors in terms of non-financial value added. The contribution from equity crowdfunding investors seems to be dependent on the effort that the entrepreneur puts into the relationship with the investors. Furthermore, equity crowdfunding also allows the entrepreneur to maintain ownership and control over the company. However, each equity crowdfunding case is different and there are no guarantees of receiving certain types of investors.