Dissertation: Crowd Funding and the Success of New Start-ups

This dissertation explores the impact of crowd funding on the success of start-up businesses. It investigates how crowd funding serves as an alternative financing method, enabling entrepreneurs to transform business ideas into reality. The research employs an interpretivism philosophy and an inductive approach, utilizing online surveys and literature reviews to assess the contribution of crowd funding. The study aims to understand the concept of crowd funding, its role in meeting financial requirements, its association with start-up growth, and to recommend ways to maximize success through crowd funding. The dissertation includes an introduction, literature review, methodology, data analysis, and conclusion, providing insights into how start-ups can leverage crowd funding to meet financial needs and achieve growth. The research also acknowledges the risks and challenges associated with crowd funding, such as the potential for project failure and the importance of marketing efforts.

DISSERTATION

Abstract
Crowd funding may be served as a new way or method of financing which in turn
enables entrepreneurs to convert their business ideas into reality. Moreover, each business entity
or entrepreneur has some unique ideas and plan but due to the lack of having enough financial
resources it is not possible for them to achieve success. In this regard, by raising funds from
large number of people over internet business entity can meet financial needs to a great extent.
With the aim to assess the extent to which crowd funding makes vital contribution in the success
of new start-ups interpretivism philosophy and inductive approach has been selected. Besides
this, to conduct study within the suitable time frame online survey has been conducted.
Further, books and journals related to crowd funding & new start-ups also have been
evaluated by the researcher to prepare brief thesis regarding study. In addition to this, by using
simple random sampling technique has been used by the researcher to opt 30 respondents for
survey. It can be observed that usually funds are raised from the banks and other financial
institutions. However, many times it happened that sufficient amount of fund is not raised from
the banks. In such kind of condition crowd funding is the one of the approach through which
sufficient amount of fund can be raised by the business firm. However, raising of fund is not
always easy task through crowd funding. This is because many entrepreneurs listed their projects
on relevant website but investors prefer to view few of websites. Due to this reason many times
entrepreneurs does not received any fund from the mentioned source of finance. It can be said
that it is the very risky source of finance.

TABLE OF CONTENTS
CHAPTER 1: INTRODUCTION....................................................................................................3
1.1 Background of the study........................................................................................................3
1.2 Research aims and objectives................................................................................................3
1.3 Research questions.................................................................................................................4
1.4 Significance of the study.......................................................................................................4
1.5 Rationale of the study............................................................................................................4
1.6 Dissertation chapters..............................................................................................................4
CHAPTER 2: LITERATURE REVIEW.........................................................................................6
2.1 Introduction............................................................................................................................6
2.2 Concept of crowd funding and its significance.....................................................................6
2.3 Contribution of crowdfunding in the growth of start-up business.........................................7
CHAPTER 3: RESEARCH METHODOLOGY...........................................................................10
3.1 Introduction..........................................................................................................................10
3.2 Research design or type.......................................................................................................10
3.3 Research approach...............................................................................................................11
3.4 Research philosophy............................................................................................................11
3.5 Data collection.....................................................................................................................11
3.6 Sampling..............................................................................................................................12
3.7 Data analysis........................................................................................................................12
3.8 Reliability and validity........................................................................................................13
3.9 Ethical considerations..........................................................................................................13
3.10 Research limitations...........................................................................................................13
CHAPTER 4: DATA ANALYSIS AND FINDINGS...................................................................15

CHAPTER 5: CONCLUSION AND RECOMMENDATIONS...................................................22
5.1 Conclusion...........................................................................................................................22
5.2 Recommendations................................................................................................................23
REFERENCES..............................................................................................................................25

CHAPTER 1: INTRODUCTION
Topic: To analyze the extent to which crowd funding assist start-up business to grow and turns
into multi million business
1.1 Background of the study
Crowd funding may be defined as a practice of raising fund for a project or venture
through large number of people. It is the most effectual alternative sources of finance which in
turn helps entrepreneur in meeting their monetary needs. Process in relation to raising finance via
crowd funding is often performed through internet mediated registries. In addition to this, crowd
funding model is mainly based on three types of actors such as project initiator, group of
individuals and moderating organizations. In the recent times, such source offinance has been
used to offer monetary assistance to wide range of creative and profitable projects. Such source
of finance places high level of emphasis on entrepreneurship and funding community oriented
social projects. Hence, crowd funding has created opportunity for entrepreneurs to raise money
to their desired level from people who are willing to invest. In this, report will shed light on
themanner in which crowd funding source provides high level of assistance to the entrepreneur
and business entities of new start-up in realizing their ideas.
1.2 Research aims and objectives
Aim of the present research or study is to assess thelevel of contribution made by crowd
funding in the growth of small start-up businesses.By considering such aim following objectives
have been draftedby the researcher:
 To develop understanding about crowd funding source of finance.
 To investigate the manner in which crowd funding source helps in meeting monetary
requirements.
 To evaluate the level of association takes place between crowd funding and growth of
start-ups.
 To recommend the ways through which growth and success level of start-ups can be
maximizedthrough the means of crowdfunding.

1.3 Research questions
For doing investigation more effectively and efficiently researcher is required to frame
suitable questions. Hence, in accordance with the aims and objectives, scholar hasframed
following questions:
Q.1 What is crowd funding?
Q.2 How crowd funding contributes in the growth of start up business?
1.4 Significance of the study
Study related to crowd funding is highly significant which in turn helps other scholars in
doing investigation effectually. Moreover, it helps them in gaining deeper insight about the
aspects of crowdfunding. Thus, by developing better understanding regarding this other scholars
would become able to conduct investigation in the right direction. Besides this, such
investigation and its outcome will also develop better understanding among theentrepreneurs
regarding the new sources of finance such as crowd funding. Thus, by getting deeper insight
about such element or sources of financestart-ups would become able to meet their monetary
requirements. All such aspects clearly present that study and its outcomes are highly important
which in turn helps researcher in doing research in an appropriate manner.
1.5 Rationale of the study
The main reasons behind conducting such investigation or research are to highlight the
significance of crowd funding source. Moreover, business entity of start-ups faces difficulty in
raising fund. Thus, it is the main issues which is facing by entrepreneur now a days. In this, such
study clearly depicts the manner in which crowd funding source offers monetary support to the
business entities of new start-ups.
1.6 Dissertation chapters
Chapter 1: Introduction
Under introductory section, scholar presents brief overview of study in relation to crowd
funding. Besides this, scholar also frames research aims as well as objectives in this chapterby
considering the aims and objectives. Besides this, researcher also mentions significance and
rationale behind conducting investigation.

Chapter 2: Literature review
In this chapter, researcher makes assessment of books, journals and scholarly articles by
presenting both positive and negative aspects related to crowd funding. Thus, researcher prepares
brief thesis in this section which in turn helps in analyzing data set more effectually.
Chapter 3: Methodology section
In the 3rd chapter of dissertation, researcheridentifies and thereby mentions tools that help
in assessing the level to which crowdfunding contributes in the growth of small sized business.
This section provides indication to the researcher during whole study.
Chapter 4: Data evaluation, findings and presentation
This chapter of thesis presents the manner in which datahas been analyzed by the
scholar. In order to determine the level to which crowd fundingis the best solution for small
business segmentresearcher has prepared themes by considering questionnaire. Besides this,
researcher has also presented graphs in this section with the motive to develop or facilitatebetter
understanding about area.
Chapter 5: Conclusion and recommendations
Final chapter of dissertation presents conclusion derived from overall investigation or
research. Besides this, researcher will also recommend the ways through which small start-ups
can meet their monetary needs or requirements.

CHAPTER 2: LITERATURE REVIEW
2.1 Introduction
Literature review may be defined as process in which scholar makes assessment of varied
data sources which is highly related to the research issue.Hence, in this section of dissertation
brief thesis has been prepared by the researcher throughevaluating the positive and negative
aspects related to crowd funding&start-p businesses (Ley, 2009). Brief thesis which is prepared
by the researcher in this section helps in making analysis of qualitative data set in the best
possible way.
2.2 Concept of crowd funding and its significance
According to the views of Mollick (2014)crowd funding may be served as a new way or
method of financing which in turn enables entrepreneurs to convert their business ideas into
reality. Moreover, each business entity or entrepreneur has some unique ideas and plan but due
to the lack of having enough financial resources it is not possible forthem to achieve success. In
this regard,by raising funds from large number of people over internet business entity can meet
financial needs to a great extent. Further, Belleflamme, Lambert and Schwienbacher
(2014)defined crowdfunding as the efforts which are made by the entrepreneursto get funds from
large number of individual via internet. In the case of crowdfunding entrepreneurs raise their
fund or finance without including any financial intermediaries. In addition to this, Agrawal,
Catalini and Goldfarb (2014)said that crowdfunding is used by business entities for marketing
purpose.By taking into account crowdfunding helps in creating interest for new projects. It is
highly significant which in turn helps business entity in gaining and sustaining competitive edge
over others (Kappel, 2009). Besides this, media also follows crowdfunding campaign which in
turn helps in enhancing the popularity of projects to the large extent.
Gerber, Hui and Kuo (2012)mentioned in their study that there are mainly four models
related to crowdfunding.On the basis of this aspect, some entrepreneurs follow patronage model
for meeting the specified goals and objectives. By considering the first model, it can be said that
funders are placed in the situation of philanthropists because they do notexpect or demand for
direct donations in against to the investment made. Along with this, Ahlers and et.al.,

(2015)depicted second model as lending one.Hence, in this,investors offer monetary support to
entrepreneurs in the form of loan. Thus, investors expect higher or some rate of return in against
to the money invested by them.On the other side, Elliot (2016)depicted third model as reward
based crowdfundingin which funders receive some benefits. In reward based funding, funders are
treated or considered as early customers. Hence, such approach enables funders toget access of
products initially which are produced from funded projects (Cohn, 2012). Thus, some special
benefits are attained by funders in the case of reward based crowd funding in terms of better
price etc. Early selling of products to the funders is one of the main aspects of reward based
crowdfunding. On the contrary to it, Drover and et.al., (2017)stated thatfunders are also treated
as investors sometimes. Fourth model of crowdfunding highly supports such aspect that crowd
funders are recognized as investors.However, on the critical note, Belleflamme and Lambert
(2016)identified that equity crowdfundingis the subject of following highly strict rules and
regulations. Besides this, lack of prestige is another main aspect that affectsthe significance level
of crowdfunding source. Moreover, if business entity fails to offer higher returns to the
stakeholders of funders then it places negative impact on the image ofconcerned business entity
(Kappel, 2008). This in turn also creates difficulty in generating funds in the near future and
thereby affects organizational growth.
2.3 Contribution of crowdfunding in the growth of start-up business
By conducting study, Sorenson and et.al., (2016)found that crowdfunding is the fast and
most effectual ways which in turn helps in raising funds or finance significantly. Besides this,
such source of finance offers monetary assistance with no upfront fees. Moreover, in the case of
crowdfunding entrepreneur is not required tomake payment of any fees due to the absence of
having financial intermediaries. However, on the critical note, Davis and et.al., (2017)said that it
is not possiblein the case of all projects to raise finance through the means of crowdfunding. It is
one of the main aspects which in turn limit the significanceof such financial source. Besides this,
Calic and Mosakowski (2016)assessed that crowdfunding is the most suitable or valuable form
of marketing which in turn helps in getting the attention of media to a great extent. Moreover, by
circulating information aboutproject through the means of online platform business entity can
approach to the large number of individuals. However, it is to be critically evaluated by
Greenberg and Mollick (2017)that business entity requires high level of resources such as money
and time for building as well as raising the interest level of individuals before the project

launches. Thus, in the lack of having enough resources it is not possible for the sole trade to get
high level of benefits from such source.
Short and et.al., (2017)has presented in their findings that by sharing business
ideathrough the online means business entity can take advice of experts. It shows that
crowdfunding source offers opportunity to the business entity in relation to making
improvements. Besides this, it also provides high level of assistance to the business entity in
testing the public reactions regarding the product or service which is going to be
introduced.Thus, if individuals react positively on product or service then it is good indicator. On
the other side, Drover and et.al., (2017) claimed that if business ideas are not secured by
theentrepreneurs through the means of copyright or then there is possibility that other individuals
will steal unique ideas from the site of crowdfunding.
Davis and et.al., (2017)investigated that crowdfunding enables business entities or
entrepreneur to convert their unique ideas into profitable business. Sometimes, banks and other
financial institutions deny giving loan for some projects due to having strict rules and guidelines.
It is the main reasons due to whichcreative projects of stakeholders remain on paper. In this
regard, crowdfunding encourages entrepreneur to leverage their ideas and thereby attain success
in the competitive business environment. However, on the critical note, Short and et.al.,
(2017)stated that in the case of crowdfunding success ratio is very low. Moreover, out of 100
project only 1 or 2 projects of business entity attains success in relation togetting funds from
general public. From assessment, it has been identified by McKenny and et.al.,
(2017)thatcrowdfunding facilitates market validation to a great extent. In addition to
this,crowdfunding works best when fund is required for relatively small projects. Moreover, in
the case of large sized investment funders have high level risk regarding the security of money
(Lawton and Marom, 2012). Thus, business entity can encourage personnel or investors in
relation to investing money in the concerned project more effectually.
On the other side, Butticè, Colombo and Wright (2017) examined that crowdfunding
option hedges risk to the significant level. Moreover, it is highly difficult for an entrepreneur to
start and attain success in business due to having challenging conditions. Further, assessment of
sufficient funding, challenges in market validation etc is the main aspects which in turn highly
influence the growth and success of new start-ups. Thus, by launching a crowdfunding campaign

provides high level of assistance tobusiness entity is avoiding such risk level. Moreover, it helps
business entity in gaining valuable learning experience (Ward and Ramachandran, 2010). It
enables sole trader to avoid giving up equity before going all out. Thus, it helps entrepreneur in
taking a product concept to market in an effectual way.However, Parhankangas and Renko
(2017)argued that potential lawsuits are one of the main aspects which in turn closely affect the
significance of crowdfunding. The reason behind this, with the motive to earn high return
investors laid high level of emphasis on investing money ingrowing as well as profitable venture
(Fang, 2008). Thus, investors become impatient when business unit generates less profitbecause
earning higher return from investment is the main motives of them. Thus, there is possibility
thatfunders or investor will sue on entrepreneur in relation to fraud, breach of contract and
mismanagement (Hazen, 2011).By considering such aspect, it can be presented that in the case of
crowdfunding there is impossibility that investors will file complaint in against to the business
entity.
Along with this, Gerber, Hui and Kuo (2012)has evaluated that crowdfunding facilitates
brainstorming to a great extent. Moreover, in this, entrepreneur is in position to encourage
individuals and thereby receives comments, feedbacks and ideas through engaging crowd.
Hence, feedbacks provided by the individuals arehighly valuable and important (Cosh, Cumming
and Hughes, 2009). Moreover, feedback system enables business entity to understand some
aspects of business on which entrepreneur had not placed emphasis before. This aspect shows
that crowdfunding source enables business entity to develop highly sound or competent business
plan which in turn helps in achieving success. Lawton and Marom (2012)analyzed in their study
that crowdfunding places negative impact on future financing options. Moreover, in the case of
crowdfunding company is filledwith inexperienced and less competent shareholders, Thus, such
aspect closely influences the decision making aspect of angel investors and venture capitalists.

CHAPTER 3: RESEARCH METHODOLOGY
3.1 Introduction
Research methodology entails tools and techniques that are undertaken by the researcher
to resolve specific issue or problem. It depicts systematic and theoreticalplan that researcher
undertakes for evaluating and analyzing research issue (Chilisa, 2011). Section of research
methodology is highly significant whichexhibitsmethods that have been used by the researcher.
Hence, with themotive to assess the contribution of crowdfundingin the growth and success start-
up business several tools has been adopted by the researcher.
3.2 Research design or type
In the field of research, research type can be distinguished in two terms such as
qualitative andquantitative. For conducting study in an appropriate manner and right direction it
is highly required for the scholar to select suitable research type. The main reasons behind this,
selection of other techniques such as data collection, analysis, approaches and philosophies are
highly influences from the type of research (Petty, Thomson and Stew, 2012). Thus, scholar is
required to carefully select type of the research by taking into account issue or problem which is
going to be investigated. Qualitative research assists in analyzinginformation which is in non-
numerical format (Schmitt, 2010). Thus, qualitative research provides high level of assistance to
the scholar in understanding research issue and associatedcauses more effectually. By conducting
such kind of investigation or research scholar can develop hypothesis for the upcoming time
period (Coleman and Ringrose,2013). On the other side, in the case of quantitative study scholar
determines or presents solution bymaking assessment of numeric facts and figures. Hence, such
study is appropriate where large number of respondents and descriptive findings need to be
analyzed.
In thepresent research,to evaluate the contribution of crowdfunding in the growth of start-
up business qualitative research design has been selected. Hence, by making assessment of
qualitative aspects regarding crowdfunding solution of research has been found and presented by
the researcher.