Case Study on Small Business Crowd Funding

Case Study on Small Business Crowd Funding


Introduction

Given the absence of collateral and adequate cash flows, as well as substantial knowledge asymmetry with investors, one of the fundamental problems that entrepreneurs confront at the outset of their entrepreneurial venture is attracting outside financing (Cosh et al., 2009). While there are many investors for bigger quantities of money, such as venture capital funds and banks, entrepreneurial ventures that need much smaller amounts of funding may depend on friends and family or personal savings to get started. They subsequently make significant use of bootstrapping methods to alleviate their financial limitations by increasing short-term earnings (Bhidé, 1992; Winborg and Landstrom, 2001; Ebben and Johnson, 2006).

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More recently, instead of contacting financial investors such as business angels, banks, or venture capital funds, some entrepreneurs have turned to the Internet to directly seek financial assistance from the general public (the "crowd") (Kleemann et al., 2008; Lambert and Schwienbacher, 2010). This method, dubbed “crowdfunding”, has made feasible to seek money for \sproject-specific investments as well as for setting up new businesses. Trampoline Systems, a UK-based software company, is one prominent example. Trampoline Systems plans to raise £ 1 million through crowdfunding. The first tranche was successfully funded at the end of 2009, with the next three tranches to be completed in 2010. 

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Conclusion

We explored when it makes sense for small entrepreneurial enterprises to utilise crowdfunding instead of another form of financing in this post. The following are some of the most important features of ventures: They need to raise a modest quantity of money to accommodate a limited number of investors. First, since certain legal forms have restrictions in this area, and second, because managing large groups, especially with modern technology, may be challenging. However, there are a few examples of ways to get around several of these issues.



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