Crowdfunding : an exploration of funder and entrepreneurial heuristics

Abstract

While crowdfunding practice has grown rapidly in the last ten years, related knowledge is still at an early stage of development. To date, many research efforts have sought to understand the determinants of campaign performance in rewards crowdfunding. Although the accumulated knowledge has been foundational, questions have arisen regarding the transferability of findings between types of crowdfunding and the lack of knowledge about individual funders and entrepreneurs. As such, scope remains for further work, especially related to understanding funder characteristics along with similarities and differences between types of crowdfunding. In addition to rewards, equity crowdfunding is an interesting area for further research as it offers a crowd-based funding option distinct from traditional sources. This thesis explores both the role of heuristics in the decision-making practices of funders and entrepreneurs along with how heuristics knowledge may be transferable between equity and rewards environments. The work draws on critical realism and the adaptive toolbox theory from the fast-and-frugal view of heuristics as a theoretical lens. Because two decision-making environments were explored, a comparative case study approach was used. Data from semi-structured interviews was transcribed and coded before being analysed thematically and formed into data structures. These represented the three main actors in each environment: the funder, the entrepreneur, and the platform managersconsultants. The findings show that specific funder types are likely to use heuristics related to financial-gain/value, emotion-and-values/brand, or momentum/impulse drives. Interpretation using the theoretical lens led to the probable use of six fast-and-frugal heuristics: tallying, take-the-best, recognition, satisficing, imitate-the-majority and imitatethe-successful. These heuristics were ecologically rational based on the type of funders using the heuristic and their interaction with structures and opportunities in the online environments in which they were used. Correspondingly, the portfolio of ecologically rational heuristicsthe entrepreneur uses in the three phases of a campaign were explained. This thesis contributes by building an understanding of the use of funder and entrepreneur heuristics in equity and rewards crowdfunding.