Entrepreneur fund-seeking: toward a theory of funding fit in the era of equity crowdfunding

Why do entrepreneurs prefer to seek one equity form of funding over another? To address this question, we develop a contingency-based model perceived fit that delineates several factors influence strategic fund-seeking decisions by entrepreneurs. In prior research, entrepreneur has largely been explained using models rely on rule-based approaches (e.g., the pecking order assumption) or value capture considerations. contrast, propose dynamic perceptions and above transactional efficiency, including atypical creation from fundraising process itself external stakeholder values. We inductively assess our in context crowdfunding (ECF) find can motivate some fund-seekers opt pursue ECF, even when they have reasonable opportunity obtain other more established sources such as angel seed-stage venture capital. This indicates ECF cases is not mode last resort proposed literature. Plain English Summary Raising capital complex process. Strategic “funding fit” for their particular ventures leading less forms variety reasons beyond efficiency. Prior research taken view investor, emphasizing what must win favor investors seed funders, deeming discouraged Inductively analyzing hundreds regulatory filings, interviews, public information, media pieces about ECF-funded firms, evidence cases, may if perceive it be better due novel nonfinancial value. explain findings proposing an emergent fit.”