This thesis is based on the general problem of how and where to raise capital to achieve their defined goals. Crowdinvesting is a new method, but yet largely unexplored, possibility to do so. Especially for young and innovative companies seeking capital to kick-start their business, crowdinvesting has been labeled as a new trend. The following research focusses on the question: What are the motives, chances, and risks from a company's perspective regarding the new phenomenon of crowdinvesting?
Crowdinvesting is the process where investors are approached about the financing of these young and innovative companies, but sometimes also established companies or selected projects are financed. The basic principle of crowdinvesting is that individual persons on the internet invest money in a company and in turn receive the right to participate in the success of the business. In return, the companies receive the financing amount as equity or debt capital.
The thesis aims to contribute to a more detailed understanding of crowdinvesting from a theoretical and empirical perspective. Due to its innovative character, most information about crowdinvesting is at the moment based on working papers, a few specialist books, and database entries. The present thesis uses the existing literature as a core to explain the concept. To ensure a profound understanding of the topic of crowdinvesting, this thesis begins with a theoretical framework in chapter 2. The chapter describes the theory of the new institutional economics and the basics of financing, including the most common financing methods. Chapter 3 then introduces the crowd as a supporting and financing instrument for companies. In particular, the concepts of crowdsourcing, crowdfunding, and crowdinvesting are expounded and illustrated with examples. Subsequently, following the theoretical aspects, the crowdinvesting market in Germany is empirically analyzed and the financing option of crowdinvesting is critically appraised in chapter 4 to answer the research question. To conclude, the findings of the previous chapters are summarized and an outlook is given within a discussion.
Table of Contents
1. Introduction
1.1 Statement of the problem and research question
1.2 Goal and approach of this thesis
2. Theoretical framework
2.1 New institutional economics
2.1.1 Transaction cost economics
2.1.2 Principal-agent theory
2.1.3 Financial intermediation
2.2 Traditional financing
2.2.1 Basics
2.2.1.1 Mezzanine capital
2.2.1.2 Financing phases
2.2.2 Financing methods
2.2.2.1 Private equity and venture capital
2.2.2.2 Business angels
2.2.2.3 Debt capital
2.2.2.4 Bootstrapping and family, friends, and fools
2.2.2.5 Public funds
3. Introducing the crowd into the financing process
3.1 Crowdsourcing – The origin
3.1.1 Types of crowdsourcing
3.1.2 Motivations of contributors
3.2 Crowdfunding
3.2.1 Donation-based crowdfunding
3.2.2 Reward-based crowdfunding
3.2.3 Lending-based crowdfunding
3.2.4 Crowdinvesting
3.2.4.1 Definition and characteristics
3.2.4.2 Actors
3.2.4.2.1 Investors
3.2.4.2.2 Platforms
3.2.4.2.3 Agency problems in crowdinvesting
3.2.4.3 Process
3.2.4.4 Legal situation in Germany
4. Empirical analysis of the crowdinvesting market in Germany
4.1 Overview
4.1.1 Market development 2011-2016
4.1.2 Characteristics of the companies in 2016
4.1.3 Platforms
4.1.4 Financing instruments in practice
4.1.5 Status of crowdinvesting projects 2011-2016
4.2 Critical appraisal
4.2.1 Motives
4.2.2 Chances
4.2.3 Risks
5. Conclusion and discussion
5.1 Conclusion
5.2 Discussion
Research Objectives and Key Topics
This thesis examines the crowdinvesting market in Germany, specifically addressing the motives, chances, and risks that companies face when utilizing this financing method. By bridging theoretical frameworks with empirical data from the 2011–2016 period, it aims to provide a comprehensive understanding of why firms choose crowdinvesting and the implications of this decision for their growth and operational strategy.
- New Institutional Economics and traditional financing paradigms.
- Categorization and functionality of crowdsourcing, crowdfunding, and crowdinvesting.
- Empirical analysis of the German crowdinvesting market development and its specific segments.
- Agency theory applications to platform-based financing.
- The influence of legal regulations on small investor protection and company financing.
Excerpt from the Book
1.1 Statement of the problem and research question
As mentioned above, companies face the general problem of how and where to raise capital to achieve their defined goals. This thesis is based on this general problem. Several financing methods exist for companies to raise capital; the companies hence have to determine which of the available financing options are the best for their current situation, and evaluate which option they finally choose. Every financing method has its own advantages and disadvantages. Since the financing option of crowdinvesting is relatively new and still being established as an option, and empirical values are largely missing, companies have to be thorough in determining whether it is a valid option for them. In this vein, this thesis focuses on the following research question: what are the motives, chances, and risks from a company’s perspective regarding the new phenomenon of crowdinvesting?
Summary of Chapters
1. Introduction: Outlines the challenges companies face in raising capital and defines the research question regarding the motives, chances, and risks of crowdinvesting.
2. Theoretical framework: Provides a foundation in new institutional economics and traditional financing methods to contextualize modern crowd-based models.
3. Introducing the crowd into the financing process: Explains the concepts of crowdsourcing, crowdfunding, and crowdinvesting, detailing actors, processes, and legal frameworks.
4. Empirical analysis of the crowdinvesting market in Germany: Evaluates market development, platform characteristics, and critically appraises the practical application of crowdinvesting for companies.
5. Conclusion and discussion: Summarizes the thesis findings and discusses the future outlook and limitations of crowdinvesting as a financing instrument.
Keywords
Crowdinvesting, Crowdfunding, Crowdsourcing, Germany, Financing, Start-ups, SME, Principal-Agent Theory, Transaction Costs, Equity, Debt Capital, Mezzanine Capital, Venture Capital, Market Analysis, Financial Regulation.
Frequently Asked Questions
What is the core focus of this research?
The work focuses on analyzing the crowdinvesting market in Germany from the specific perspective of capital-seeking companies, examining why they choose this route and what risks or benefits they encounter.
What are the primary themes discussed?
Key themes include institutional economics, the evolution of financing methods, the distinction between various crowdfunding types, and an empirical breakdown of the German market.
What is the central research question?
The study seeks to identify the specific motives, chances, and risks that companies experience when engaging in crowdinvesting.
What methodology is applied?
The thesis utilizes a literature-based theoretical framework followed by an empirical analysis of market data recorded by portals such as Crowdfunding.de and Crowdinvest.de between 2011 and 2016.
What does the main body cover?
It covers the definitions of institutional economic concepts, a comparison of traditional versus modern crowd-based financing, and a critical appraisal of empirical market performance.
Which keywords best characterize this work?
The work is defined by terms like crowdinvesting, financing, start-ups, German market, and institutional economics.
How does the legal environment affect crowdinvesting in Germany?
The German market saw significant changes with the "Kleinanlegerschutzgesetz" in 2015, which introduced stricter prospectus requirements and investment limits to protect small, private investors.
What are the main risks identified for companies?
Companies face planning uncertainty if financing targets are not met, potential damage to their reputation in the event of a failed campaign, and high administrative burdens post-financing.
What role do platforms play in this process?
Platforms act as financial intermediaries, providing the technical framework, performing screening and selection of projects, and managing communication between companies and investors.
- Quote paper
- Tim Meierkord (Author), 2017, Analysis of the Crowdinvesting Market in Germany. Motives, Chances, and Risks from a Company's Perspective, Munich, GRIN Verlag, https://www.grin.com/document/376095
