Expand innovation finance via crowdfunding

Abstract

Lee Fleming 2,3 C rowdfunding (CF) platforms, such as Kickstarter (KS), offer a means of funding innovation, connecting inventors and entrepreneurs with a multitude of supporters, who each provide a small fraction of the amount required to fund the project. Although considerable funding for innovation has historically come from venture capitalists (VCs), the entrepreneurs funded by VCs often mirror the investors in terms of their educational, social, and professional characteristics and end up concentrated in a small number of regions (1-4). Policy-makers have thus hailed CF platforms, hoping that they will expand access to entrepreneurial finance, including among women and minority innovators, and that the innovations funded will create jobs and spur economic growth (5). But if particular regions, or certain sorts of individuals, routinely produce better ideas (6), and VC concentrates on them, then CF might simply compete with professional investors to fund the same ideas. We find, however, that CF has been funding innovators in a large number of places that have typically been excluded from VC, and has also been expanding the geographic reach of VC itself. We compare data from 2009 to 2015 on KS campaigns and on VC investments [see supplementary materials (SM) for details on all data and analyses]. One of the dif-INSIGHTS POLICY FORUM ENTREPRENEURIAL ECONOMICS Expand innovation finance via crowdfunding Crowdfunding attracts venture capital to new regions

On open innovation, platforms, and entrepreneurship

“…For example, platforms such as Kickstarter, Indiegogo, and Patreon provide new sources of capital for start‐ups, allowing entrepreneurs to reduce their dependencies on traditional venture capitalists. As Sorenson, Assenova, Li, Boada, and Fleming () found, the impact of such platforms is greater on entrepreneurial activities that are outside traditional venture capital‐rich regions. Crowdsourcing approaches and digital platforms are also changing labor sourcing in new ventures, thereby enabling entrepreneurs to assume lower operational risks.…”

“…Thus, being "born global" (Cavusgil & Knight, 2015;Knight & Cavusgil, 2004) has become easier than ever as platforms become the intermediary to monetization on a global scale. Similarly, crowdfunding platforms dramatically decrease the spatial constraints on entrepreneurs' access to capital (for the U.S., see Sorenson et al, 2016) and allows for a greater degree of cross-border funding. Despite all this, studies in entrepreneurship have so far not accounted for the effects of new ventures' presence and participation in global platforms and innovation ecosystems.…”

A successful crowdfunding project for eHealth research on grown-up congenital heart disease patients

“…Crowdfunding, a funding method of pooling together donations to support a specific initiative by using social media has been demonstrated to have significant success outside the medical field [9,10]. Its use in the medical field is relatively new [11], and data on its potential success are scarce [7,12].…”

Crowdfunding and Innovation

“…Yu et al (2017) found a correlation between crowdfunded projects and angel funding rounds at the regional level in the United States. Sorenson et al (2016) identified a similar relationship between crowdfunding and venture capital. They suggested that the development of crowdfunding could be at the origin of the development of traditional forms of entrepreneurial finance (venture capital or angel finance) in regions that are traditionally excluded from these forms of financing.…”