Abstract  Background:                     In an equity crowdfunding campaign, the investor receives shares in the company in return for the investment, which makes equity crowdfunding similar to traditional sources of equity funding. Nevertheless, skeptics have referred to equity crowdfunding as “dumb money”, since it might not provide similar non-financial value added as realized from professional investors. The main literature used for the frame of reference were Boué (2007), Macht and Robinson (2008) and Macht and Weatherston (2014). The literature worked as a basis for deriving a table, outlining the non-financial value added received by venture capitalists and business angels, as well as showing where literature is lacking regarding non-financial value added by equity crowdfunding investors. Purpose: The purpose of this thesis was to explore the non-financial value added by equity crowdfunding investors to the entrepreneur. This purpose was answered by two research questions: (1) Do equity crowdfunding investors provide similar non-financial value added to the entrepreneur as traditional equity funding investors do? (2) Are there any additional non-financial value added realized from equity crowdfunding? Method: This thesis follows the interpretivist research paradigm and undertakes an abductive research approach in order to explore the purpose. Primary data was collected through semi-structured interviews with seven entrepreneurs who had successfully conducted an equity crowdfunding campaign in Sweden. Secondary data was collected from peer-reviewed articles containing relevant theories and models. Conclusion: This research suggests that there are similarities between professional investors and equity crowdfunding investors in terms of non-financial value added. The contribution from equity crowdfunding investors seems to be dependent on the effort that the entrepreneur puts into the relationship with the investors. Furthermore, equity crowdfunding also allows the entrepreneur to maintain ownership and control over the company. However, each equity crowdfunding case is different and there are no guarantees of receiving certain types of investors.

Background - Equity-based crowdfunding is rapidly emerging as a source of funding, as a way for ventures to overcome financial obstacles. It is based on a large number of investors, the crowd, who contributes with smaller investments that together helps fund the venture, where the investor in return receives equity in the venture. In order for the entrepreneur to successfully fund their ventures, it is important to understand what motivates the investors to invest. Problem: The theoretical framework Motivation in Equity-Based Crowdfunding has been developed to understand what drives the investors. However, this framework has mainly been developed on crowdsourcing and general crowdfunding, which is significantly different from equity crowdfunding. Therefore, further research has been suggested by other authors on the topic, to specifically investigate investor motivation in equity crowdfunding. Furthermore, existing research has only studied investors as one group of people and not divided them into smaller segments. Purpose: The aim of this descriptive study is to understand what motivational factors drives investors to invest in equity-based crowdfunding, and how the motivations to invest is different between the demographic characteristics within age, gender, location, income and investor experience. Method: With a deductive research approach, four hypotheses were developed based on the literature review. Using the framework Motivation in Equity-Based Crowdfunding as a basis for the research, the investor motivation was studied on 142 equity crowdfunding investors using a quantitative online survey. The results were then analyzed using frequency analysis, descriptive statistics, t-statistics and multiple regression analysis. Conclusion: Based on the findings, a revision of the framework Motivation in Equity-Based Crowdfunding have been suggested. Furthermore, it was found that investors were primarily driven by enjoyment, philanthropic and financial payoffs in their decision to invest. There were also significant differences found in investor motivation between the demographics age, gender and investor experience, whilst the location or income of the investor did not have any effect on investor motivation. Contribution: By understanding what investors are motivated by, the entrepreneurs can promote these factors in their crowdfunding campaign, which may increase their chances of getting successfully funded. Furthermore, if the entrepreneur wants to bring in a certain type of investor, they can adjust their promotion after the factors that motivates a certain demographic characteristic.

Due to changes of regulations in the banking sector after the credit crunch, equity crowdfunding has become an alternative funding source in raising capital for small and medium sized enterprises, that face a lack of financial resources or trustworthiness. The aim of this thesis is to identify the determinants of a successful equity crowdfunding project. We base the study on a sample of 398 projects pitched on an equity crowdfunding platform (Crowdcube) between 2011-2016. The analysis of the cross-section dataset is conducted of Logit, Ordinary Least Squares (OLS) and Negative Binomial regression models. The results show that the more investors participate in the investment, the higher is the success of equity crowdfunding. Moreover, a higher equity participation offered to the investors also has a positive impact on the financing success. However, a prior crowdfunding history of the company does not raise its reliability. Moreover, technology companies are less trusted by the investors and less successful on equity crowdfunding platform. Depending on the model used, start-up companies usually gain a higher success with their pitch, which can be positively influenced by a high social media presence.

P2P借貸及股權模式群眾募資(即所謂金融回報型群眾募資)在過去五年間快速地成長，被認為係使中小企業及新創公司可有效率籌資之工具。為維持其制度之功能-籌資之效率性，在對籌資公司或平台之規範強督不宜過高，以降低其法規遵循成本。惟由於投資P2P借貸及股權模式群眾募資伴隨許多種類之風險，故在降低對籌資公司或平台之法規遵循負擔時，投資人保護之問題亦不可忽視，如何在此二者間達成平衡，為監管上之重要議題。 本文首先介紹在P2P借貸或股權模式已有發展或正在發展之美國、英國以及日本之規範概況。其次，在我國法部分，先就我國之股權模式群眾募資規範之發展為介紹，並參照比較法之規範為評析。其後，則就我國若引進P2P借貸制度，在我國既有法制如銀行法上可能碰到之問題及規範方向為分析。 在股權模式部分，櫃買中心在2014年1月開始營運功能相似之創櫃板。於2015年，金管會宣布證券經紀商經主管機關核准後，可經營股權性質群眾募資平台(後稱民營平台)，二者均受櫃買中心所發布之法規命令所規範。創櫃板與民營平台在功能及規範上有其相似之處，當二者在未來採雙軌並行時，可能有市場區隔及風險控制不足與櫃買中心在主導創櫃板同時，亦作為民營平台之監管者之利益衝突等問題。再者，在各自制度之問題上，二者亦有共通之處。關於投資人保護部分，第一，投資人可否適用相關規範為救濟，除證交法之反詐欺條款外，目前尚不明確。其次，關於投資限額之規範，則有計算與驗證限額之方式與轉售限制之規範必要性及周邊問題等之討論。關於籌資公司，則有籌資限額規範之寬嚴問題及僅可發行普通股之規範等之討論。在平台業者之規範，在民營平台部分，有關於平台業者准入規範、名義股東制度之可行性、單一業務經營及重大禁止行為等問題之討論。 在P2P借貸制度部分，關於我國法制，本文認為在各該模式是否使平台甚而借用人有構成銀行法收受存款之問題未能被釐清之前，P2P借貸制度恐無法被順利引進，可能須透過銀行法之修正，並輔以主管機關之解釋始能解決此一問題。關於對P2P借貸平台之規範，P2P借貸平台是否被定位為金融機構之一環，亦可能影響其應遵循之法律或規範為何。惟本文認為為促進P2P借貸平台之發展，即使主管機關將其定位為金融機構之一環，亦需適當設置例外，藉此可避免繁重之法規遵循成本讓使P2P借貸之制度失其設計之原意。關於貸與人之保護，在救濟途徑、投資限額、風險之評估與預告、中間帳戶之監管、資訊揭露、平台是否應提存準備金及設置意外準備基金、貸與人是否適用存款保險制度以及平台倒閉時對流通在外借款之處理機制等，亦應設置相關規範，惟亦應注意貸與人保護與上述平台法規遵循成本之平衡問題。在法規之規範方式上，本文則認為P2P借貸之商業模式可能乃與傳統借貸之商業模式有所落差，而平台之定位亦可能與傳統金融機構有所不同，故認為宜單獨就P2P借貸修訂專法或至少由主管機關單獨訂定法規命令，較為妥適。 / P2P lending and equity crowdfunding (so called “financial return crowdfunding,” FR crowdfunding for short), having grown rapidly in the last 5 years, are considered as an efficient vehicle for funding small and medium enterprises as well as start-ups. For maintaining the function of FR crowdfunding that is the efficiency of raising fund, it’s not appropriate to put strong regulations on the enterprises needing fund and the platforms of FR crowdfunding. However, because investing in FR crowdfunding associates with several types of risks, while reducing the burdens of the enterprises or platforms on compliance with the regulations, the issue of investor protection also cannot be ignored. How to balance between these two topics mentioned above is an important issue on the regulations of FR crowdfunding. Firstly, this article introduces the regulations on FR crowdfunding in U.S., Britain and Japan where P2P lending or equity crowdfunding has developed or is developing. Secondly, in the regulation of Taiwan, the article presents the regulation on equity crowdfunding of Taiwan first and make some comments, referred to the foreign regulations mentioned above. Afterwards, the article analyzes the problems, encountered on the existing laws, such as the Banking Law, and studies how to regulate P2P lending, if P2P lending is introduced to Taiwan. In the section of the equity crowdfunding, Taipei Exchange (GreTai Securities Market) started Incubation Board for Startup and Acceleration Firms (GISA) in January 2014 whose function is similar to that of the equity crowdfunding platforms. In 2015, Financial Supervisory Commission declared that securities brokers are permitted to operate platforms of equity crowdfunding (called private platforms hereinafter) once the securities brokers are authorized by the competent authority. Both GISA and private platforms are regulated by the regulations issued by Taipei Exchange. The functions and the regulation structures of GISA and private platforms are similar. When GISA and private platforms operate in a double-track way in the future, there are some problems like the insufficiency of market segmentation and risk control. Because upon the regulations, Taipei Exchange also supervises the private platforms, there exists a problem of interest conflict. Moreover, the regulations of GISA and private platforms also have common issues. About the protection of investor, firstly, whether the remedy regulations of other laws could apply for the investors of GISA and private platforms, except for the anti-fraud regulation of Securities and Exchange Act, is not clear so far. Secondly, there are also some discussions on the regulation of investment cap like the approach to calculate and verify the cap, the necessity of the measure of resale limitation, etc. About the enterprises raising fund on the GISA or private platforms, there are some discussions on whether the cap of raising fund should be higher and whether those enterprises should be permitted to offer preferred stock to raise fund, etc. About the platform, concerning to the regulations on the private platforms, there are some discussions on the industry access regulation, the feasibility of nominee structure, the operation of single business and the acts prohibited by the regulation, etc. In the section of the P2P lending, the article notes that before the problem, whether the borrowers or the platforms under different business models be considered as doing the business of accepting deposits under the Banking Law, could be clarified, it’s afraid that P2P lending cannot be introduced to Taiwan smoothly. This problem could be solved by the amendment of the current Banking Law or by the legal interpretations issued by the competent authority of Banking Law. About the regulations to the P2P lending platforms, whether the P2P lending platforms are considered as a financial institution affects which laws or regulations the P2P lending platforms might obey. However, for promoting the development of P2P lending, the article thought even if P2P lending platforms are considered as a financial institution, it’s necessary to set exceptions appropriately on it. By doing that, the purpose of P2P lending might not be destroyed by the heavy burden of compliance of regulations. About the protection of lenders, the regulations on P2P lending should include the issues on remedies of P2P lenders, investor investment cap, rating and precaution of risk, the supervision on the account of fund raised from lenders, information disclosure, whether the platforms should deposit reserves and set contingency fund, whether P2P lenders are protected by the deposit insurance, and the mechanism to deal with the loans still outstanding in case of the platform failure. However, the issue of balancing the lenders protection and the cost of regulatory compliance of the platforms still need to be considered. About how to regulate P2P lending, the article thinks that the business model of P2P lending is different from traditional lending model and that the P2P platforms are also different from the traditional financial institutions. Consequently, the article thinks that it’s appropriate to make laws or regulations singly for P2P lending.

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Traditional investment practices have been revamped with more and more modern methodsto fit entrepreneurial settings. The evolution of equity crowdfunding has created an alternative to venture capital,bank loans and business angels. Due its novelty, recent studieshave onlyfocusedon its mechanisms and financial regulations. We draw from crowdfunding concept and social theories to develop an understandingonthe connection between social media networkand equity crowdfunding success.Utilizingdata from LinkedIn and a leading equity crowdfunding platform in the Nordics, we explore the impact of social media network to funding campaigns’ success. We collected data on every company on the platform, and we collected data on the key members’ LinkedIn connections. The results propose that it is possible to predict certain types of success in equity crowdfunding based on the number of LinkedIn connections. This study contributes to existing literature by providing better understanding on another social network, LinkedIn, which is often connected to project pages on crowdfunding platforms. We contribute even for improved insight in decision making processes behind the investments; which is in high interest of entrepreneurs, investors and platforms

Crowdfunding innebär ett insamlande av kapital från stora mängder individer, oftast med små belopp vardera, utan användandet av traditionella finansiella mellanhänder. Crowdfunding som investerings- och finansieringsalternativ växte fram efter finanskrisen 2007/2008 då det blev svårare för företagen att få finansiering från restriktiva banker. Med grund i crowdfundingmarknadens novelitet och att företagen som bedriver en crowdfundingkampanj i många fall är små och nystartade, framstår crowdfunding som en riskfylld investeringsform som medför problem för investerare. Nya investeringsbeteenden har uppmärksammats hos generationen millennials där osäkerhet råder huruvida millennials beteende och preferenser liknar tidigare generationer. Studien ämnar därav att utreda vilka problemområden som existerar vid investering i equity-crowdfunding, samt vad som påverkar millennials inför investeringsbeslutet. Studien anammar en kvalitativ metod och omfattar totalt tio intervjuer, varav sju intervjuer med millennialinvesterare (födda mellan 1980-2000) som vardera gjort minst en investering i en equity-crowdfundingkampanj, två intervjuer med yrkesverksamma private equity- managers från Swedbank och Skandia, och en intervju med Nordeas ansvarige för utveckling av Nordeas egen crowdfundingplattform. Studien resulterar i en identifiering av framstående problemområden vid equity-crowdfunding. Problemområden inkluderar ett informationsasymmetriskt underläge för investeraren som gör investeraren motvillig att investera stora belopp. Crowdfundings små investeringsbelopp påverkar mängden utförd due diligence och rationaliteten av due diligence förvrängs av flockbeteendet crowdförtroende, där investerarna förlitar sig på varandras bedömningar och i en form av fear of missing out investerar irrationellt. Millennialgenerationen premierar investeringar där en personlig koppling finns och generationen använder sig av sociala medier för att utvärdera företagen och ägarna. Adverse selection identifieras som ett konkret problem inom crowdfunding gällande equity-crowdfundingkampanjer och studien rekommenderar att lagstiftning bör fattas för att minska det informationsasymmetriska underläget. Studien bidrar med begreppsutveckling och ökad förståelse för equity-crowdfunding och dess olika problemområden, samt uppmärksammar millennialgenerationens förändrade investeringsbeteende. / Crowdfunding is a rising mass funding concept, where a large number of investors each contribute with a small amount, without using standard financial intermediaries. Crowdfunding as an investment and financing alternative started developing after the subprime crisis in 2007/2008. During this period, the economic situation was in decline and banks financing more restrictive. Due to the novel crowdfunding market and the primarily young companies that conduct crowdfunding campaigns, crowdfunding as an investing alternative is considered high risk and uncertain, and entails considerable problems for the investors. New investing behaviour has been recognized in the millennial generation and it is unclear whether they have the same behaviour and preferences as previous generations. The purpose of this study is thereby to examine which problematic areas exist when investing in equity-crowdfunding and what affects millennials investment decision. The study takes on a qualitative method by conducting a total of 10 interviews: seven interviews with millennial investors (born between 1980-2000) who have completed at least one equity-crowdfunding investment, two interviews with professional private equity- managers from Swedbank and Skandia, and one interview with Nordeas Head of Alternative Finance responsible for the development of their crowdfunding platform. The study identifies prominent problematic areas when investing in equity-crowdfunding. An information asymmetric substandard shows impact on the investors’ willingness to invest and especially to invest larger amounts. The small amount invested affects the level of performed due diligence, and wherein the rationality of due diligence is perverted by the heard behaviour crowd trust. Crowd trust is the phenomena where investors rely on each other as quality signals, and due to a fear of missing out, invest irrational. The millennial generation is shown to prefer investments where they have a personal connection with the company or product, and millennials primary source of due diligence is through social media. Adverse selection is identified as a concrete problem in equity-crowdfunding and the study proposes that legislation can reduce the information asymmetric problem. The study contributes with an increased understanding for equity-crowdfunding and its problematic areas, but also with added knowledge for the millennial generation and its investing behaviour.

Social Enterprises face funding challenges. As investors focus too narrowly on risk and return, social enterprises may struggle to compete with commercial enterprises for investment capital. In this context, lending and equity crowdfunding have not been sufficiently examined, and its growing importance for business financing makes it valuable to understand its implications for social enterprises. This study collects qualitative data and uses thematic analysis to identify advantages and disadvantages that social entrepreneurs experience when using lending or equity crowdfunding. By conducting six semi-structured interviews we identified nine major advantages which are Viable funding option, Publicity and marketing, Engagement creation, Access to impact-minded investors, Alignment with company principles, Higher valuation of the company, Tests market viability, Favourable power balance towards investors and Large pool of capital; and five major disadvantages which includes Higher costs, Large number of investors, Inexperienced investors, Public exposure & Efficiency concerns. We discuss that crowdfunding represents values that are attractive for social enterprises. Further, crowdfunding sometimes offer higher valuation or more capital to social enterprises, compared to other funding sources. We see that several advantages are especially important in business’s startup phase. However, crowdfunding can also cause greater stress on the management team, and require time and resources. Entrepreneurs also need to consider factors such as public embarrassment when campaigns fail.

Regulation Crowdfunding, enacted in May 2016, is intended to facilitate capital formation in startups and small businesses funded primarily by small investors (Securities and Exchange Commission (SEC), 2016b). This dissertation investigates (1) the risk of fraud in equity crowdfunding offerings and (2) whether investors respond to fraud signals by selecting (rejecting) offers with low (high) fraud risk. Because equity crowdfunding is quite new, no frauds have yet been identified. Therefore, I employ a predictive analytics tool, Benford’s Law, to assess the fraud risk of the offering. I select observable indicators to represent the Fraud Triangle dimensions—incentives, opportunities and rationalization—and test if they predict fraud risk. I also compare offer funding outcomes to my fraud risk assessments to identify if investors’ selections consider fraud risk appropriately. The relaxed auditor assurance and disclosure requirements attracts both honest and dishonest founders, but I find that the risk of fraud is higher in equity crowdfunding offers than in public offerings as reported by other studies. I find that there are several individual fraud indicators and models that explain fraud risk, but these do not predict whether the offer is funded or not (funding outcomes) or the amount that is raised if funded. This dissertation is the first to apply Benford’s Law to equity crowdfunding offers and map fraud attributes to fraud risk and funding outcomes. My dissertation can inform investors, issuers, regulators, intermediaries and practitioners of the high risk of fraud in equity crowdfunding offerings and of several noteworthy fraud indicators. / Business Administration/Accounting

I den här studien har vi undersökt hur investerare upplever asymmetrisk information och principal-agentproblem i den relativt nya investeringsformen equity crowdfunding. Vi har även undersökt hur investerarna går tillväga för att hantera den asymmetriska informationen och principal-agentproblemen. För att göra detta genomfördes studien med ett kvalitativt tillvägagångssätt där vi samlade in data med hjälp av semistrukturerade intervjuer. Intervjuerna hölls med equity crowdfunding investerare från FundedByMe, Sveriges ledande crowdfunding-plattform. Resultaten av studien indikerar på att investerarna finner asymmetrisk information som närvarande inom equity crowdfunding och en nödvändighet av att ta reda på fler uppgifter om bolagen utanför FundedByMe, med anledning av att uppgifterna som finns på plattformen upplevs vara bristfälliga för att kunna ta ett beslut om investering. För att överkomma problem gällande asymmetrisk information har det visat sig att investerarna tenderar att följa andra investerares val av kampanjer. Därmed används alltså ett flockbeteende av investerarna som en metod för att överkomma problem gällande asymmetrisk information som de stöter på. För att överkomma problemet ännu mer, så använder sig investerarna främst av ledningsgruppens egenskaper i deras due diligence då den finansiella informationen anses vara begränsad.Resultaten av vår studie indikerar även på att principal-agentproblem upplevs vara närvarande inom equity crowdfunding då investerarna anser att företagarna utövar ett själviskt beteende som är i kontrast med investerarnas egna intressen för att maximera sin egna nytta. Flertalet respondenter i vår studie angav dock att de inte agerar på något särskilt sätt för att hantera det eventuella problemet. Av det som däremot görs består insatserna till största del av kontroll samt övervakning av ledningsgruppernas arbete. Investerarna använder sig även av gruppforum på Facebook för att förbinda sig med de övriga mindre investerarna i bolagen för att tillsammans med dem förstärka sitt inflytande. / In this study, we have investigated how investors experience asymmetric information and principal-agent problems in the relatively new investment form equity crowdfunding. We have also investigated how investors deal with the asymmetric information and principal-agent problems. To do this, the study was conducted using a qualitative approach where we collected data using semi-structured interviews. The interviews were held with equity crowdfunding investors from FundedByMe, Sweden's leading crowdfunding platform. The results of the study indicate that investors find asymmetric information to be present in equity crowdfunding and a need to find out more information about the companies outside FundedByMe, as the information available on the platform is perceived to be deficient in being able to make an investment decision. In order to overcome problems relating to asymmetric information, it has been found that investors tend to follow other investors choice of campaigns. Thus, a flock behaviour is used by the investors as a method to overcome problems regarding asymmetric information that they encounter. In order to overcome the problems even more, investors mainly use the management group's characteristics in their due diligence since the financial information is considered to be limited. The results of our study also indicate that principal-agent problems are perceived to be present in equity crowdfunding, as investors think that companies are pursuing selfish behaviour that is in conflict with investors own interests to maximize their own benefit. However, the majority of respondents in our study indicated that they do not act in any particular way to deal with the potential problem. However, of efforts that are made, they largely consist of control and monitoring of the work of the management groups. Investors also use groupforums on Facebook to connect with other smaller investors in the companies to strength their influence with them.