Over the past ten years crowdfunding has emerged as an alternative investment form and a new way to raise funds. Project funders increasingly try to raise funds from a crowd through the internet. Therefore, the “crowd”, also referred to as “backers” play the key role in a successful funding process.

The literature on crowdfunding examines the different crowdfunding types and their benefits for backers. The literature on the German culture and crowdfunding in Germany will be presented. Using a questionnaire, this study aims to identify benefits which motivate people living in Germany to invest in a particular crowdfunding type. Subsequently, the study evaluates the four main crowdfunding types and which motivate potential backers most to invest into crowdfunding based on the benefits they are offering. All participants of the questionnaire are German residents.

The analysis of the questionnaire’s collected quantitative data reveals that the benefits people receive from the participation in rewards-based crowd-funding, such as receiving a final product before the official product launch and actively participating in the realisation of a crowdfunding project have a huge motivational impact on people to invest in crowdfunding. Moreover, the analysis from the gathered data showed that not receiving any benefits from participation in donation-based crowdfunding mostly discouraged the participants in this study. Thus, people living in Germany mostly expect benefits for investing their money. Moreover, the motivations vary within different age groups.

This study identifies limitations that occur using the chosen sampling method and closes with recommendations for further research.

Leseprobe

Abstract

DEGREE

BA (Hons) International Business

Administration

DISSERTATION TITLE

Crowdfunding as an alternative invest-

ment opportunity in Germany Benefits as

a Motivational factors to participate in

crowdfunding campaigns

DATE

April 2018

KEYWORDS

CROWDFUNDING

MOTIVATION

INVESTMENT

GERMAN CULTURE

Over the past ten years crowdfunding has emerged as an alternative in-

vestment form and a new way to raise funds. Project funders increasingly

try to raise funds from a crowd through the internet. Therefore, the "crowd",

also referred to as "backers" play the key role in a successful funding pro-

cess.

The literature on crowdfunding examines the different crowdfunding types

and their benefits for backers. The literature on the German culture and

crowdfunding in Germany will be presented.

Using a questionnaire, this study aims to identify benefits which motivate

people living in Germany to invest in a particular crowdfunding type. Sub-

sequently, the study evaluates the four main crowdfunding types and which

motivate potential backers most to invest into crowdfunding based on the

benefits they are offering. All participants of the questionnaire are German

residents.

The analysis of the questionnaire's collected quantitative data reveals that

the benefits people receive from the participation in rewards-based crowd-

funding, such as receiving a final product before the official product launch

Abstract

and actively participating in the realisation of a crowdfunding project have a

huge motivational impact on people to invest in crowdfunding. Moreover,

the analysis from the gathered data showed that not receiving any benefits

from participation in donation-based crowdfunding mostly discouraged the

participants in this study. Thus, people living in Germany mostly expect

benefits for investing their money. Moreover, the motivations vary within

different age groups.

This study identifies limitations that occur using the chosen sampling

method and closes with recommendations for further research.

Abstract

Table of Contents

Abstract

Table of Charts

List of Tables

Introduction

1.1

Research topic

1.2

Research objectives and question

1.3

Dissertation Structure

1.3.1

Chapter 2 Literature Review

1.3.2

Chapter 3 Methodology

1.3.3

Chapter 4 Analysis and Findings

1.3.4

Chapter 5 Conclusions

Literature Review

2.1

Introduction

2.2

Definition of Crowdfunding

2.2.1

Motivations of and benefits for Backers

2.2.2

Crowdfunding web-sites and their differences

2.2.3

Rewards-based crowdfunding

2.2.4

Equity-based crowdfunding

2.2.5

Lending-based crowdfunding

2.2.6

Donation-based crowdfunding

2.3

German Culture

2.3.1

Crowdfunding in Germany

2.4

Limited Literature

2.5

Hypothesis

Methodology

3.1

Introduction

3.2

Research Approach

3.3

Research Strategy

Abstract

3.3.1

Qualitative Research

3.3.2

Quantitative Research

3.4

Questionnaire

3.5

Sampling

3.6

Data Analysis

3.7

Limitations

3.8

Ethical Considerations

3.9

Chapter Summary

Analysis and Findings

4.1

Introduction

4.2

Questionnaire

4.2.1

Research demographic

4.3

How well-known crowdfunding is in Germany

depending on the residents age

4.4

Preferred crowdfunding type based on the benefits

4.5

Specific benefits within crowdfunding projects

4.6

The preferred crowdfunding type in Germany

depending on the residents age

Conclusion

5.1

Introduction

5.2

Answering the research question

5.3

Review of the research objectives

5.4

Limitations of the conclusions

5.5

Suggestions for further research

References

Appendices

7.1

Appendix A Reflective Learning Statement

7.2

Appendix B Google Trends Crowdfunding

7.3

Appendix C Questionnaire

Abstract

7.4

Appendix D Expected and observed data

Table of Charts

Table of Charts

Chart 2.1

Crowdfunding volume in 2015 per crowdfunding

type (Massolution, 2015)

Chart 2.2

Equity Crowdfunding in Europe between 2012 and

2014

Chart 2.3

German Culture Hofstede cultural dimensions

("Country Comparison - Hofstede Insights," n.d.)

Chart 2.4 Crowdfunding volume in Germany between 2012 and

2014 per crowdfunding type (Zhang et al., 2015)

Chart 4.1

Crowdfunding Awareness

List of Tables

List of Tables

Table 2.1 Meyskens and Bird Framework Choosing a

crowdfunding type

Table 3.1

Questionnaire Questions and their purpose

Table 3.2

Ethiclal Considerations

Table 3.3

Research Methods and Methodology summary

Table 4.1

Age distibution within the questionnaire

Table 4.2

Involvement in crowdfunding campaigns

Table 4.3

Awareness of crowdfunding per age group

Table 4.4

Chi-squared test 1

Table 4.5

Awareness of crowdfunding with regard to the age

expected and observed count

Table 4.6

Benefits that motivate peopole to participate in a

crowdfunding campaign

Table 4.7

Benefits that motivate people to invest into

rewards-based crowdfunding

Table 4.8

Benefits that motivate people to invest into equity-

based crowdfunding

Table 4.9

Benefits that motivate people to invest into lending-

based crowdfunding

Table 4.10

Benefits that motivate people to invest into

donation-based crowdfunding

Table 4.11

Chi-Squared test 2

Table 4.12

Benefits that motivate people to invest into

crowdfunding with regard tot he age

Table 7.1

Motivation for receiving material or immaterial

rewards per age group

Table 7.2

Motivation for receiving shares in the funded

company per age group

Table 7.3

Motivation for receiving interest rates on the

invested money per age group

List of Tables

Table 7.4

Motivation for not receiving any benefit (donation)

per age group

Introduction

1 Introduction

This chapter aims to provide an opening into the following dissertation. It

starts with an introduction into the research topic, the research objectives

and the research question as well as the dissertation structure.

1.1 Research topic

The increasing digitalisation that has emerged over the past decades had a

huge impact on the way businesses operate and organize themselves. E-

Commerce for instance is a digitalised form of commerce and involves all

types of business transactions via the internet. However, not just the com-

merce has been affected through the digitalisation, but also the way com-

panies raise funds. (Ryu & Kim, 2016) Especially small and medium sized

companies and start-ups increasingly intend to raise funds online. Particu-

larly smaller ventures are facing the problem of early-stage funding in the

beginning of their entrepreneurial activity, due to a lack of sufficient cash

flows and the presence of information asymmetry between a company and

its investors (Cosh, Cumming, & Hughes, 2009). However, financing as

one of the most critical resources is needed in order to succeed (Kortum &

Lerner, 2000). Therefore, especially small companies facing a barrier in

raising money at the beginning of their entrepreneurial activity are increas-

ingly using crowdfunding to raise funds in an early-stage in order to realise

new ideas (Kuppuswamy & Bayus, 2013; Ordanini, Miceli, Pizzetti, &

Parasuraman, 2011). Thus, crowdfunding as a digitalised option to raise

funds has gained importance but not a high profile in Germany yet. In order

to have a successful funding process the project funder needs to motivate

people to invest in the project. Crowdfunding projects cannot be successful

in the funding process without the "crowd". Consequently, the motivation

behind investing in this alternative investment opportunity is going to be

Introduction

explored in this research. Crowdfunding emerged over the past 10 years

and has started to be regarded as a serious option to invest money in.

However, not all people are inclined by the same benefits the different

crowdfunding types have to offer.

The purpose of this study is to survey the crowdfunding market in Germany

in order to achieve an understanding about factors that motivate German

residents to use crowdfunding as an alternative investment method. Due to

the increasing digitalisation crowdfunding is likely to receive an increasing

attention from both, founders / companies attracting project funding and for

people (the crowd) that want to benefit from of their investment.

1.2 Research objectives and question

The researcher put forward several objectives for this dissertation and uses

different methods in order to achieve these research objectives within the

research topic as described above. The research objectives are as follows:

1. To gain a greater understanding of how well-known crowdfunding is

in Germany depending on the residents' age.

2. To identify which crowdfunding type and therefore which benefits

motivate people in Germany the most to invest in a crowdfunding

project.

3. To see which potential benefits of the different crowdfunding types

are the drivers that motivate German to invest in crowdfunding.

4. To verify whether age affects the perception of a benefit that partici-

pants can receive in a crowdfunding project.

The research question can be described as follows:

"Which crowdfunding type with its benefits motivates German resi-

dents the most to invest in a crowdfunding project?"

Introduction

The research question has been chosen due to the willingness of the re-

searcher to analyse the crowd since the crowd makes the success of a

crowdfunding project possible in the first place. Due to a personal interest

the researcher wants to examine the benefits that motivate people in Ger-

many to invest into crowdfunding. The different crowdfunding types with

the different benefits within these crowdfunding types are tested on wheth-

er or not they motivate people that live in Germany to invest in crowdfund-

ing campaigns.

1.3 Dissertation Structure

A short overview of the chapter will be given below in order to create an

understanding of the dissertation structure and what to expect. The disser-

tation consists of five chapters including the Introduction as the first chap-

ter. The introduction aims to give an overview about the research topic, the

researcher's research objectives and questions and the structure of the

dissertation.

1.3.1 Chapter 2 Literature Review

In chapter two the literature in the area of research will be reviewed. There-

fore, the author investigates the literature that contains crowdfunding and

the different crowdfunding types. The German culture is being introduced

and an insight on crowdfunding in Germany will be provided. This chapter

provides the reader with background knowledge before continuing with the

methodology of the research.

1.3.2 Chapter 3 Methodology

Chapter three aims to explore the ways in which this research can be car-

ried out. The research approaches and different research strategies will be

considered, alongside with the sampling and the data analysis. The chosen

method will be explained and justified within this chapter. The limitations of

Introduction

the chosen method will be analysed and addressed. Besides the tech-

nique, ethical consideration will be taken into account as well.

1.3.3 Chapter 4 Analysis and Findings

Within this section the findings from the conducted research will be pre-

sented to the reader of this dissertation. This chapter will analyse the quan-

titative data that has been gathered to achieve a better understanding of

crowdfunding as an alternative investment method in Germany. Once the

data will be gathered and analysed, knowledge will be applied to the find-

ings and therefore the data will be given meaning. The findings will be re-

ferred back to the presented literature.

1.3.4 Chapter 5 Conclusions

This chapter will conclude this dissertation and the results from the re-

search will be referred back to the research objectives and whether these

objectives have been realised in this research. An answer to the research

question will be provided as well. This chapter will discuss any limitations

of the conclusions, alongside with areas that would be appropriate for fur-

ther research.

Literature Review

2 Literature Review

2.1 Introduction

This section aims to provide the literature written in the field of crowdfund-

ing in order to obtain a wider knowledge of the subject. While traditional

forms of financial resources such as bank loans, venture capital, private

equity and business angels are well known, a new form of investment has

emerged over the past 10 years: crowdfunding (Tomczak & Brem, 2013).

Firstly, the author will define the term crowdfunding, followed by a definition

of the term backer and the benefits crowdfunding offers for backers. In sec-

tion 2.2.2 different crowdfunding web-sites are going to be introduced

which leads to the following sections 2.2.3 to 2.2.6 which will provide addi-

tional information and descriptions of the four main crowdfunding types. An

overview about the German culture as well as an insight of crowdfunding in

Germany will be thematised in this section as well. This section will be

concluded through the pointing out how limited the literature is and the hy-

pothesis.

2.2 Definition of Crowdfunding

In recent years the term crowdfunding emerged as a new way for ventures

to raise funds via online platforms without using traditional sources

(Lambert & Schwienbacher, 2010; Mollick, 2014; Ordanini et al., 2011).

Especially small enterprises are increasingly using crowdfunding for early-

stage funding to commercialise new ideas (Kuppuswamy & Bayus, 2013).

The term crowdfunding originates from the term crowdsourcing which Jeff

Howe initially introduced in his article in the WIRED magazine (Howe,

2006). Crowdsourcing aims to develop corporate activities through feed-

Literature Review

back, ideas and solutions of the crowd. In the term of crowdfunding how-

ever, the main objective is to raise money for investment (Belleflamme,

Lambert, & Schwienbacher, 2010). While there are several definitions of

crowdfunding in the literature, there is no definition that has received uni-

versal scientific acceptance (e.g. Belleflamme, Lambert, & Schwienbacher,

2014; Tomczak & Brem, 2013). Even though there are miscellaneous defi-

nitions, most of them include the focus on receiving financial funding from a

crowd. In Lambert and Schwienbacher's definition for instance, crowdfund-

ing is described as the provision of financial resources for projects and en-

terprises by a group of individuals instead of professional parties

(Schwienbacher & Larralde, 2010). Another definition for crowdfunding is

provided by Bradford whose description of this alternative financing method

is similar since he defines crowdfunding as raising small amounts of money

from a large crowd (Bradford, 2012). While crowdfunding projects consist

of three players (Ordanini et al., 2011):

1. the entrepreneur that offers a project and hopes to receive financial

funding in order to realise the project or idea

2. the sponsor that makes the decision whether to invest into a project

or not

3. and the crowdfunding platform that functions as an intermediary be-

tween the creator of the project or idea and the backer (Ryu & Kim,

2016),

neither of the two above described definitions covers the compensations

for and motivations of sponsors (which are called backers).

2.2.1 Motivations of and benefits for Backers

Since the successful funding of a crowdfunding project is dependent on the

participation of backers, understanding their motivations and benefits is

fundamental in this area of research (Ryu & Kim, 2016).

Literature Review

The Massolution Crowdfunding Industry Report reported a total funding

volume worldwide of $16,2 billion in 2014, which is an increase of 167%

compared to the total funding volume of $6,1 billion in 2013 (Massolution,

2015). Moreover, Massolution forecasted a total crowdfunding volume of

$34,4 billion for 2015. Therefore, it is obvious that according to the report

the total crowdfunding volume worldwide and therefore the crowdfunding

market increased tremendous over the past years and will grow in the fu-

ture as well.

The willingness of backers to fund is dependent on different factors.

Agrawal, Catalini and Goldfarb (2011) found that sponsors that are geo-

graphically close to the project founder are more likely to invest into a

crowdfunding project in the initial phase of the funding period. Moreover,

the number of backers plays a role in the willingness of other potential

sponsors to fund a project. Many backers contributing with a small sum to

the combined amount are sending out a stronger signal to other backers

compared with an single backer investing the same amount individually

(van de Rijt, Kang, Restivo, & Patil, 2014).

Gerber, Hui and Kuo (2012) found that reward seeking is a factor that mo-

tivates people to support a crowdfunding campaign. Furthermore, people

are motivated by being part of a community and through the support that

they are giving the founders in order to achieve their goals (Gerber et al.,

2012). Cholakova and Clarysse (2015) on the other hand found that back-

ers are in fact more motivated through financial than through nonfinancial

factors.

The potential benefits that motivate individuals to fund a project can be di-

vided into four main types. The benefits for backers depend on the crowd-

funding type (Mollick, 2014). Crowdfunding can be divided into different

"types" that differ in their benefits for backers. The four main crowdfunding

types that potential backer can support are: reward-based, equity-based,

Literature Review

lending-based and donation-based crowdfunding. There are additional

crowdfunding types such as royalty crowdfunding and hybrid crowdfunding

which however do not have a significant high market share within the

crowdfunding market and will therefore not be explored in detail in this

study. Based on the four main types funders have the option to choose

crowdfunding campaigns based on the following four compensations that

are most likely to be offered to backers (Mollick, 2014):

1. Backer receive a reward (such as the product of the funded cam-

paign or an immaterial reward such as being named on the compa-

ny's website)

2. Backer receive equity stake

3. Backer offer the fund as a loan and receive interest

4. Backer donate and do not receive a direct return.

Massolution not only reported a forecast for the total funding volume

worldwide, the company also published a forecast regarding the total fund-

ing volume per crowdfunding type for 2015. The forecast includes royalty

and hybrid as two additional crowdfunding types. Royalty crowdfunding is a

type of equity crowdfunding in which backers' receive profits from projects

that are mostly not on-going businesses (Beaulieu, Sarker, & Sarker,

2015). Hybrid crowdfunding does not just include crowdfunding, founders

are also able to get in contact with joint ventures or business angels

through these platforms (Clawson, 2015). These two types of crowdfunding

have been combined to the below shown pie chart into the category "oth-

ers".

Ende der Leseprobe aus 82 Seiten - nach oben

Details

Titel: Crowdfunding as an alternative investment opportunity in Germany
Untertitel: Benefits and Motivational factors to participate in crowdfunding campaigns
Hochschule: Northumbria University
Note: 1,0
Erscheinungsjahr: 2018
Seiten: 82
Katalognummer: V432149
ISBN (eBook): 9783668744417
ISBN (Buch): 9783668744424
Sprache: Englisch
Schlagworte: Crowdfunding Investment Culture Motivation Finance

Arbeit zitieren: Anonym,, 2018, Crowdfunding as an alternative investment opportunity in Germany, München, GRIN Verlag, https://www.grin.com/document/432149

Crowdfunding as an alternative investment opportunity in Germany

Benefits and Motivational factors to participate in crowdfunding campaigns

Leseprobe

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