Digital Entrepreneurship in Finance: Fintechs and Funding Decision Criteria

Abstract

After the 2007–08 global financial crisis, research flourished on entrepreneurship through digital innovation in the financial market as well as on investors’ influence on digital technology-based entrepreneurs’ funding decisions. This study combines these two research streams to analyze the decision-making criteria for funding financial technology companies (fintechs), hybrid companies that combine digital entrepreneurship, technology, and banking. The study first uses prior literature to derive important characteristics to define fintechs and then uses 12 expert interviews to elaborate on decision-making criteria in funding. Except for smaller peculiarities, fintech funding does not appear to differ from that of other digital entrepreneurship in different markets, and—as with most digital business models—scalability was identified as a key criterion. Additionally, by serving as a major provider of money for young companies, banks have changed their role and positioning in funding new financial technology entrepreneurs. Through developments in digital technology, banks have shifted from traditional money-lending activities (i.e., debt-financing) to becoming stakeholders in fintechs and, hence, equity investors. We also describe how these formerly distinct fields have converged due to regulatory requirements, digital newcomers, and a need for constant innovation, with their future sustainable development dependent on sharing and collaboration.

Regional Entrepreneurship, Business Environment, and High-Quality Economic Development: An Empirical Analysis of Nine Urban Agglomerations in China

“…Many scholars have studied entrepreneurial development depending on the business environment to increase the number of entrepreneurs and the rate of business growth ( Sattari and Mehrabi, 2016 ; Khan et al, 2019 ; Radović-Marković et al, 2019 ; Jang et al, 2020 ). Other researchers have explored the positive effects of financial development on promoting entrepreneurship ( Civera et al, 2017 ; Léon, 2019 ; Hommel and Bican, 2020 ; Liu et al, 2020 ; Srivastava et al, 2021 ; Charfeddine and Zaouali, 2022 ). In addition, the development of innovation has contributed significantly to entrepreneurship and economic growth ( Huggins and Thompson, 2015 ; Ferreira et al, 2017 ; Pounder, 2019 ; Pradhan et al, 2020 ).…”

The Influence of Local Economic Conditions on Start-Ups and Local Open Innovation System

“…The cost of raising such capital is also much higher than the average interest rate on bank loans. In exchange for accepting high risk, investors usually, expect a few dozen percent shares in the profits of start-ups [58][59][60][61][62][63][64][65][66][67][68].…”

Influential Factors of Network Changes: Dynamic Network Ties and Sustainable Startup Embeddedness

“…A factor that impacts both tie creations and tie deletions is financial means. This is a key factor in sustainable business development [49]. Startups are often constrained by their budget, which drives many of them to look for new investments [3,50,51].…”