"All that glitters is not gold!": The (Unexplored) Determinants of Equity Crowdfunding

Plain English SummaryOur research presents a novel framework that delves into the intricacies of the investment experience of equity crowdfunders. We examine the underlying motives that drive their investment decisions (utilitarian, emotional and expressive), the corresponding behavioral patterns, and the challenges that they encounter along the way. Drawing on the principles of behavioral finance, we contend that the success of equity crowdfunding as an alternative funding source for entrepreneurial firms hinges on the platform's ability to meet the diverse investment motives of the crowd across different stages of the investment process. To illustrate our argument, we conducted a netnographic analysis of a UK-based online community of equity crowdfunders. Our findings expose the adverse effects of a lack of monetization and low economic returns on the utilitarian motives of investors, leading to a diminished level of satisfaction. Additionally, we reveal that the difficulties investors face in interacting with entrepreneurs and platforms, coupled with the challenges of presenting themselves as experts, supporters of valued projects, or successful crowdfunders, can hamper the expressive and emotional motives of investors, resulting in dissatisfaction. Such challenges have the potential to erode the future interest of equity crowdfunders in the platform, undermining the viability of equity crowdfunding as a funding source for entrepreneurial firms. Our framework offers valuable insights into the factors that shape the investment experience of equity crowdfunders, providing testable propositions and highlighting the importance of addressing the identified issues to ensure the long-term sustainability and success of equity crowdfunding as a funding avenue for entrepreneurial firms. Drawing from the rich literature in behavioural finance and extensive analysis of forum data from a UK equity crowdfunding platform, we present a comprehensive framework that delineates the investment decision-making process of equity crowdfunders. Our framework captures the utilitarian, emotional, and expressive investment motives that drive crowdfunders, their behaviours and actions during and after the campaign, as well as the challenges they encounter in fulfilling their investment goals. Our work highlights the crucial need to explore the extent to which entrepreneurs and crowdfunding platforms cater to the diverse investment motives and expectations of the crowd. We offer practical insights to entrepreneurs and platforms on how they can better align their strategies with the expectations and needs of equity crowdfunders.