Newcastle University Dissertation: Crowdfunding Impacts on Startups

This dissertation investigates the impacts of crowdfunding on startups, drawing on secondary research and interviews with startups in India and the UK. It examines how crowdfunding provides access to capital, hedges against risk, serves as a marketing tool, provides proof of concept, allows brainstorming of ideas, attracts loyal customers, offers easier access to funds compared to traditional methods, enhances public relations, provides opportunities for preselling, involves little cost, affects future prospects, and may require effort with no guarantee of success. The study analyzes investor profiling, risk profiling, and regional breakdowns of crowdfunding initiatives, highlighting the importance of technology and intellectual property rights. It discusses the positive and negative effects of crowdfunding, emphasizing its role in making more consumers and exploring different investment types. The research also touches on the importance of public relations, preselling opportunities, and the potential challenges startups may face in raising further finances through crowdfunding. Desklib provides this document as a resource, among many other past papers and solved assignments, for students.

Impacts of Crowdfunding in Startups
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4.0 Chapter 4: Finding and Analysis
The study has been conducted taking into account secondary research and 2 pertinent
interviews. Start-ups often aim at attracting equity crowd-funding, which has started since 2011
in the India. Crowdfunding can act as a catalyst for creating new funding for bringing equity
investment into mainstream business (Gerber & Hui, 2013). Analysis of scope of crowdfunding
has revealed several advantages and disadvantages of crowdfunding as being the impacts from
the same. The findings have been arrived at from 2 interviews conducted one from an Indian
startup Riot Solutions and another a UK startup called Technocon. The name of the first
interviewee was Adra and name of second interviewee is Puneet Singh The first company in
India offers e-Monitor and the second company provides services to Siemens Company products.
The following are some of the findings of the study;
Findings 1: Providing Access to Capital: Crowdfunding has gained prominence amongst Indian
startups. There are a number of startups that have been established in the India in recent years.
Some of the platforms includes SEEDRS, fantoo, escape the city, estatesdirect.com,
eMoneyUnion, Rushmore, HAB and so on. From the interview-1 it was understood that HAX
crowdfunding was used which helped the company to collect US$140,000. The Indian startup
could not opt for other crowdfunding startup as it was not available. Another company had made
use of Kickstarter and was successful in raising $150,000.
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Figure 1: Startups Platforms
Source: (Dunsby, Retrieved on 4th September 2018)
The crowdfunding projects that have succeeded in recent years can be understood from
the figure below as well. The capital that had been raised successfully from the projects has
already been depicted.
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Figure 2: Crowdfunding Projects
Source: (Richter, Retrieved on 4th September 2018)
Findings 2: It provides hedging against risk: Crowdfunding allows collecting money from
smaller number investors and not from a single investor at a time. Resorting to a large number of
investors allows startups to defer redemption at one go and hedge against risks.
Table 1: Risk Profiling of Crowdfunding
Type of Risk Risk Category
Avert Manage Mitigate Risk Profile/ Impact
1. Repayment
risk
Manage Medium
2. Timeline risk Mitigate
over long
period
Medium
3. Credit risk Mitigate High
4. Overall Risk Manageable
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Findings 3: Crowdfunding serves as a marketing tool: As crowdfunding is collected from a
large number of people, it also helps generate consumers of products or services. Crowdfunding
serves as a marketing tool for a greater number of investors/consumers. The interviews revealed
one from tech company and other service company, had to hire marketing agents to promote
their company but the crowdfunding in itself acted as a marketing platform.
Table 2: Investor Profiling of Crowdfunding
Source: Author
Investors
Low Income Group
Middle Income
Group
Higher-middle
Income Group
High Income Group
Findings 4: It provides proof of concept: Gathering fund from a large number of investors
allows proving the concept of business in itself. Investors supporting the business acts as a proof
of the success of the concept. The first interviewees concept was not knew in the Western
markets, however it was a new idea in Asian markets. The concept of e-monitor being relatively
new and the product being pricy. In another interview service for Siemens products was
relatively an old idea.
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Findings 5: Crowdsourcing allows brainstorming of ideas: Investing in crowdfunding has a
brainstorming impact, as investors need to be convinced through the certain idea. Both the
companies conducted nerve rattling marketing promotions for their companies.
Findings 6: Crowdfunding allows prospective loyal customers for the business: Investors once
convinced for the business, can become prospective clients for it as well. Convinced investors
can also act as investors for the business, which is reflected through several business ideas.
Bothe the interviewees was able to attract client towards their businesses.
Findings 7: Provides easy of attracting funds compared to traditional methods: Traditional and
debt related businesses funding ideas often require complicated procedures to get accepted.
Regional breakdown of some crowdfunding initiatives depicts crowdfunding is very young and
the exchange is small. Looking for all the offers in 2011 and the first half of 2014 to get an
overview in the form of annual fluctuations. The increase in purchasers' purchases has an impact
on the distribution of regional companies. Crowdfunding platforms focus on London and the
south. The crowd fleet is more prominent, it was launched to the southwest (which is the source
of funding for such a region), which has recently expanded to London. London has many other
important places, such as EIS and EIS seeds, and the Cambridge Annual General Meeting.
London is an undisputed leader in scouting in the UK both in business and in investment.
London companies received 102 bids, while in Southeastern 25 and the other. London companies
also received £ 24.3 million, while the southwest was £ 7.6 million. From 2013, the gap between
London and other regions has increased significantly. Formerly a regional unit and in 2011, the
southwest was the largest bid although all investments were still in London. Crowdfunding
London's strength is the most prosperous position in the UK's investment and capital corporation.
In the first half of 2014, the 2014 London Finance Cooperation Agreement noted a lower
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percentage of total trade in the region (12%) compared with other regions such as the West
Midlands (17%) at noon. Western (24%) and Northern Ireland (13%). The Indian startup
revealed in her interview that she had no other option. Similar opinion was voiced by the UK
start-up.
Findings 8: It allows the enhancement of public relations: A business is able to build large
relationships with consumers and investors hence public relations. A good PR at the beginning of
a business often proves to be successful for the long-term period of the business. Sectoral
department reviews all events between 2011 and 2014 to cope with the volatility caused by
annual information fluctuations. Technology and Intellectual Property Rights were the most
successful sector and the transaction volume was $ 50 million, or £ 13.7 million. In 2011-2014
the industry is the highest, 45: 7.4 and 42, and trade and industry 42 and 8.8 million kilos. Nama
three sectors comprise 60 percent of operations and 63 percent of total investment. Technology /
IP Seka Professional Industrial Services and is the first-second generation of trade and
investment in the UK at the same time, if success fits. Industrial subcontractors are unexpected,
but Silla Talla was significantly less in the season on the major investment market. Public
finances account for 17% of the sector and its business 5% for technology / IP and 8% for
commercial professional services. It is Bebemes, all other sectors, higher in the first half of 2014
than in 2013. The industry was the first three years of the industry in the first half of 2014, but it
could be a sign of diversity: since 2011, business and professional services are an important part
of the business. The next level of the best interpreters was rest and entertainment, 21 deals with a
total of 5.3 million pounds. Half Event 21 was 2.6 million. Both the companies was
technological companies but one was in India, another one was in UK.
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Findings 9: Provides an opportunity for preselling: Crowdfunding business allows the
opportunity for preselling. Through selling of concept to investors and convincing them, they are
able to presell their ideas.
Findings 10: It is accompanied by little cost or is free: Crowdfunding investors provide funds to
the business expecting no fixed return. Unlike in regular debts, startups might not be able to
afford the the fixed cost for setting up the business. Crowdfunding approved 18 events and 2.5
million. Small mobile phones, average free presentation compared to other areas with great relief
Total investment for all retail businesses. Good prospects for growth potential in the big market
to support the entire consumer market, and as previously mentioned, Return to date has focused
on the development. In total, there was a total of 14 branches in the private sector. An incredible
result compared to a relatively small industry that handles the total amount. The stock supports
the population by 18% of industries. No longer because the whole company, forests, and
fisheries are small and it seems to benefit the demographic structure. Obligated during the first
half of 2014. 3 8 events and 1 million. Investments in industry 9 million. The pound sterling
2011-2014 was merged. You will see that the article did not traditionally attract a lot of
investment money. Private equity funds were developed in the United States in the middle of
2000 and early 2011 in the United Kingdom when the hearing began. Since then many other
platforms have emerged, some of which have tried different models and rows (see below).
Seedrus became the first agile group to be elected a Financial Behavior Authority (FCA); Since
then, CFA has played an active role in monitoring the capital and the legal framework to support
such development. For example, the required council after the VIA, the new regulator of FCA,
which includes measures to improve the protection of investors. to the first startup in the
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interview, the crowdfunding campaign came at a cost of 20% liability and to the other startup, it
was at 15% liability.
Findings 11: Affects the future prospects of startup businesses: A business opting for such
sources of finance is able to expand in a random manner. But in the future, there might be
challenges, which the business might face in raising further finances.
Findings 12: Crowdfunding might require effort and can emerge to have no result in the end:
Businesses might not succeed in the end to raise crowdsourcing finances. This was not supported
by either of the interview.
5.0 Chapter 5: Discussion
The following discussion has been developed in connection with the interviews that was
taken, which revealed various facts regarding crowdfunding. Crowdfunding has several positive
and negative effects on the start-up phases. Crowdfunding makes more consumers and is
interested in seed financing (Beaulieu, Sarker & Sarker, 2015). Entrepreneurship has allowed
exploring different types of investment types and designs, many of which are expected but very
demanding. Several offerings were selected directly in the ownership structure, with individual
investors responsible for their own start-ups. Others select the structure of their claimants in
which the underlying company treats the actions of investors on their behalf. One of the public
characteristics is that a company calculates the exchange rate valuation, usually, it is set, which
leads to higher debt in relation to the business and what investors can expect (Vismara, 2016).
Start-ups uses a different strategy, as brainstorming is automatically valued during the pricing
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process and depend on the interest of the investor. Some less accumulated platforms rely more
on other areas and their usual activities. Crowdcube has created a corporate fund managed by
Inversión Corazón Valiente, in which the public can invest in a limited liability company.
Similarly, Seedrs offers the opportunity to invest in a hurry in the fund and programs, benefiting
experienced investors. Crowdcube began to pay off debts based on their debt and Setrers began
offering convertibles (Kuppuswamy & Bayus, 2018). Some were created for a specific social or
community orientation, such as the Multitude Mission. In general, contracts funded by
crowdfunding on the crowdfunding platform do not have other mutual investments, but this is
not always the case. HAX offers opportunity for various Asian start-ups and Riot Solutions was
one of them to qualify.
Crowdfunding platforms such as Seedri and Crowdcube provides such opportunities.
Often consumers might be interested in any product, regardless of the fundraising potential
campaign, the investment has created. Investors often come from being consumers of real
products (Tomczak & Brem, 2013). It works well when the consumer market overlaps the
audience of investors. Crowdfunding is effective but takes time and effort to convince investors.
Increasing investments require a lot of work and are not easy to attain over time. Economic
opportunity does not take note of aspects of business growth. The company can directly find
investors such as Eliminating LinkedIn, saving the cost of credit usually 5-7% of the applied by
the exchange platform fund-raising or the forecasting corridor agent (Ahlers, Cumming, Günther
& Schweizer, 2015). Crowdfunding is more effective than angelic investors. However,
successful campaigns need intelligent materials video and writing, so that original speculative
efforts are still important. The crowd is really an exciting crowd. It is unusual for the campaign
finance group to succeed in case one has already paid 30% of the turnover before it was
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published on stage. It is referred to as the "inertial money". This is necessary to affect other
investors, especially in the case of start-ups (Ley & Weaven, 2011).
Crowdfunding requires exact qualifications as the biggest criticism of the group's funding
lately depends on the company's estimates. As in case of Riot Solutions, all fore-runners of the
Company were primarily technical persons and did not have much knowledge of marketing. But
in the second company, the promoters possessed some knowledge regarding marketing. It seems
that many good developers have changed. This is almost the time decrease in the passive state
incentives the risk of investing in seed and ultimately increasing the estimates. Investors are
sensitive to this development in cases of start-ups and follow the paradoxical reaction (Bocken,
2015). The financial investors and fund managers have difficulties in controlling the investor
group to manage all documents at the beginning of the investment. Hence, they generally do not
prefer the start-ups in their portfolio. Investors need to be informed regularly. Some investors
may be curious about others and they need more management. But in general, it is much easier to
communicate than managing individual relationships (Carvajal, García-Avilés & González,
2012). Crowdfunding provides ease of access to capital. An entrepreneur may think that only the
capitalization of venture and investment banks can accredit for non-specific accreditation. But
this might not emerge truly for start-ups. Crowdfunding is a good choice for financing
companies and can be achieved without capital or debt. The rented platform offers an
opportunity for entrepreneurs to get community funds to give them certain products or gifts
(Mollick, 2013).
The risk associated with crowdfunding is generally hidden. Starting a business is a
dangerous and difficult journey. In addition, there are predictable costs, problem marking and
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assurance, and others who are trying to help the longest part of the repertoire now. A risk
evaluation campaign can close risk associated with crowdfunding and serve as a useful learning
experience. Crowdfunding, today, offers entrepreneurs today to market certification and transfer
their own goods before marketing and marketing (Hemer, 2011). Provision of marketing tools is
rendered by crowdfunding in start-ups. Effective entertaining effective campaigns are a great
way of placing on-market projects and outlook. Many of the social networking sites are many in
order to provide a reference platform for your site and other social networking sites. In general,
this brings thousands of organic visits to Enterprises from individual users and potential lenders.
The use of users is an antivirus marketing center as they can share information about their links
and shares (Moritz & Block, 2016). Proof of providing the idea is established in crowdfunding
start-ups. The market is difficult at the beginning, but crowdfunding eases it. The first question
that an angel investor or institutional investor is often a proof of concept and a great way to gain
respect and trust is to prove that the company performs a successful crowdfunding campaign. It
allows different brains to provide ideas on the start-up. One of the biggest challenges for small
businesses and entrepreneurs is to fill all the gaps in business (Vismara, 2016). In addition to the
financial campaign, the entrepreneur has the opportunity to attract public opinion, obtain
opinions, comments and ideas. This opinion is important because it helps to understand some
aspects of previously ignored activities. It can also inspire other ideas to come and contribute to
the business from potential customers.
The crowdfunding campaign not only presents entrepreneurs' activities and products but
also gives them the opportunity to share their message and goals (Schwartz, 2012). Those who
view it as a marketing effort and decide to participate in people who believe in a long-term
successful company. Essentially, these people are the first recipients of the start-up business. The
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