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THE RELATIONSHIP BETWEEN
ENTREPRENEURS’ WELLBEING AND
CROWDFUNDERS IN EQUITY
CROWDFUNDING:
THE CASE OF SWEDEN
BACHELOR THESIS WITHIN: Business Administration
NUMBER OF CREDITS: 15
PROGRAMME OF STUDY: International Management
AUTHOR: NdumaMARTHA MOLINGE
TUTOR: OSKAR ENG
JÖNKÖPING 05/2020
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Bachelor Thesis in Business Administration
Title: THE RELATIONSHIP BETWEEN ENTREPRENEURS' WELLBEING AND
CROWDFUNDERS IN EQUITY CROWDFUNDING: THE CASE OF SWEDEN
Author: Nduma Martha Molinge
Tutor: Oskar Eng
Date: 2020-08-20
Key terms: Entrepreneurs, Well-being, Crowdfunders, Crowd-funding, Business Relationship, Small
and Medium-sized Enterprises, and Venture Capital.
ABSTRACT
Crowdfunding is becoming a new form of funding used by entrepreneurs in Sweden who seek financing
for their ventures or projects. This form of funding of which the crowdfunders invest in a nontraditional
alternative requires a relationship between the crowdfunders and the entrepreneurs.
This thesis aims to provide extensive information into how entrepreneurs and crowdfunders interact with
each other. While considering research that has been carried out so far on the growth of crowdfunding,
the author wishes to provide more detailed findings and an understanding of how crowdfunders and
founders operate after equity crowdfunding.
The empirical findings were collected using a semi-structured questionnaire from 20 Swedish
entrepreneurs that are currently engaged with equity Crowdfunding and have received funding for their
ventures. The basis for the design of the questionnaire was built upon a literature review and previous
researches. The research was carried out as an exploratory study using a qualitative approach known as
thematic method of data analysis to investigate entrepreneur and crowdfunders relationships and what
successes can be recorded based on the relationship.
This thesis indicates that the entrepreneurs were largely satisfied with the relationship and benefits they
derived from equity crowdfunding. However, this research also presented challenges and benefits of
crowdfunding as experienced by the respondents. The benefits of the crowdfunders-entrepreneurs
relationship as a factor have contributed to entrepreneurs' wellbeing as described by the participants.
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ACKNOWLEDGEMENTS
This bachelor thesis and its research process would not have been possible without people who merit
the most significant appreciation. First of All, this thesis would not have been possible without God
almighty, who has provided me with the strength, all the Business Enterprises, both Small and Medium,
that allowed me to send out survey questions to them and took out time to respond and give invaluable
contributions into the completed multiple case study. Secondly, I would like to thank this thesis tutor
Oskar Eng, whose guidance has supported both encouragement and assistance during my thesis.
Thirdly, I would like to thank my husband, Mr Roy Dobdinga Lambo, my beautiful daughter Gabriella
Kuna and my newborn baby Myles for their support and understanding of my situation during my
thesis write up. Also, my great appreciation goes to my family friend Mrs Patricia Awe and her
husband, Dr Awe, for the word of encouragement toward my education. I would also like to thank all
the different groups and fellow students. They have given me a lot of valuable help throughout this
process and for always persuading me to develop and enhance my work. And finally, my
acknowledgement goes out to associate professor Anders Melander. He has provided guidelines and
advice on how to go about writing the bachelor thesis, which has been very helpful from beginning to
end.
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TABLE OF CONTENTS
Abstract ....................................................................................................................................................... 2
Acknowledgements ..................................................................................................................................... 3
1.0 Introduction ........................................................................................................................................... 8
1.1 Background ................................................................................................................................... 8
1.1.1 Definition of keywords and concepts .................................................................................... 9
1.2 Problem ....................................................................................................................................... 10
1.2.1 Research purpose................................................................................................................. 12
1.2.2 Research approach............................................................................................................... 12
1.2.3 Research question ................................................................................................................ 12
1.2.4 Perspective .......................................................................................................................... 13
1.2.5 Delimitation ......................................................................................................................... 13
1.3 Limitation ................................................................................................................................ 13
2.0 Literature review ........................................................................................................................... 14
Frame of reference: ............................................................................................................................... 14
2.1. Crowdsourcing ............................................................................................................................... 15
2.2. Stakeholders ................................................................................................................................... 16
2.3. Advancement of entrepreneurship from the classical viewpoint ................................................... 17
2.4. Wellbeing ....................................................................................................................................... 18
2.4.1. Entrepreneurs’ wellbeing ........................................................................................................ 19
2.6. Methods of financing the new startup ventures .............................................................................. 22
2.6.1. Traditional approaches to financing the startup new venture. ................................................. 22
Venture capital .................................................................................................................................. 22
2.7. Business angel ................................................................................................................................ 24
2.8 Crowdfunding .................................................................................................................................. 25
2.8. Advantages in participating in equity crowdfunding ..................................................................... 30
2.9. Disadvantages in participating in equity crowdfunding ................................................................. 31
3.0 Methodology ...................................................................................................................................... 33
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3.1 Area of study: .................................................................................................................................. 33
3.2 The population of study: .................................................................................................................. 33
3.3. Sampling techniques ....................................................................................................................... 33
3.4. Method of data collection ............................................................................................................... 34
3.5. Survey and scale development ....................................................................................................... 34
3.6. Review on the literature on the subject .......................................................................................... 35
3.7. Demographic information of respondents ...................................................................................... 35
3.8. Method of data analysis .................................................................................................................. 35
3.8.1 Phases of thematic analysis (braun and clarke, 2006) .............................................................. 36
4.0 Results ................................................................................................................................................. 39
4.1. Extent of interaction with crowdfunders and entrepreneurs .......................................................... 40
4.1.1. Relationship ............................................................................................................................. 40
4.2. Nature of impact ............................................................................................................................. 41
4.2.1 Activities .................................................................................................................................. 41
4.3. Financial interference ..................................................................................................................... 43
4.3.1 Funding ..................................................................................................................................... 43
4.4. Threats ............................................................................................................................................ 44
4.4.1 Challenges: ............................................................................................................................... 44
4.5. Strength .......................................................................................................................................... 45
4.5.1 Benefits ..................................................................................................................................... 45
4.6. Result deductions and summary ..................................................................................................... 46
5.0 Conclusion ........................................................................................................................................... 48
5.1. Discussion ...................................................................................................................................... 49
5.2. Limitations ...................................................................................................................................... 51
5.3. Recommendation ............................................................................................................................ 52
5.4. Further research .............................................................................................................................. 52
Link to questionnaire and result ............................................................................................................ 65
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List of Tables:
Table 1- Phases of thematic analysis adapted from Braun and Clark (2006) ................................... 38
Table 2- Summary of areas, themes and sub-themes ........................................................................ 39
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List of Figures:
Figure 1- ec.europa.eu/growth/SMEs/business-friendly-environment/SME...................................... 21
Figure 2- SMEs in Sweden, 2020…………........................................................................................ 22
Figure 3- How the venture capital industry work................................................................................ 23
Figure 4- How equity crowdfunding work (from the author of the thesis)……..................................28
Figure 5- Chart showing participants responses to question based on relationship............................ 40
Figure 6- Chart showing participants responses to question based on activities………......................41
Figure 7- Chart showing participants responses to interview based on funding................................. 38
Figure 8- Chart showing participant's response on challenges............................................................ 43
Figure 9- Chart showing participant's response on benefits................................................................ 44
Figure 10- Chart showing participant's responses on how equity crowdfunding has benefited them..46
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1.0 INTRODUCTION This session will focus on giving background knowledge on entrepreneurs' wellbeing. Then move on to
the problem formulation, the research purpose and approach and lastly, its limitations. This will help the
reader to have background knowledge on the topic.
1.1 Background
Entrepreneurs require a financial source to form and grow their firms (Cassar, 2004, Hughes, Cumming
et al., 2009). One way by which Entrepreneurs can come up with the funds to fund and possibly grow
their firms is through past savings accumulated or borrowing from relatives and friends in the case of
the former and using unspent profits which can be ploughed back into the business in the case of the
later. They can also raise fund through the traditional method of raising finance.
However, accumulating savings and accessing funds from relatives often can be difficult. Looking for
funds to sustain and grow a business, especially during the infancy stage, may be difficult because of
what has been called the liability of newness. Even when internal funds in the form of unspent profits
are available, they may be insufficient to fuel Entrepreneurs' aspired growth (Cassar, 2004; Cash,
Cumming & Hughes, 2008; & Manigart, 2010). It must not go unmentioned, though, that when
Entrepreneurs can access funds to either form or grow business and use the funds judiciously, they stand
to reap substantial gains in the way of increased profits which Entrepreneurs can utilize in improving
their welfare by increasing the consumption of consumer durable and non-durable goods. By
implication, the inability of Entrepreneurs to access funds when they need them would result in
Entrepreneurs welfare reduction.
Fortunately for Entrepreneurs, this may not happen to them because nowadays, there exists an
alternative way by which Entrepreneurs can source funds they may need for business creation or growth.
That source of funds is called crowdfunding. This manner of financing projects by Small and Medium-
sized Enterprises (SMEs) involves an Opp Internet safety through the Internet, for the provision of
financial resources either in the form of donation or in exchange for the future product or some kind of
reward or voting right (Everett, 2008; Freedman &Jin, 2010).
Typically, entrepreneurship research focuses on firm-level outcomes like growth and performance. On
the other hand, people seek entrepreneurship for a variety of very personal and individual reasons.
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As with other self-organized human pursuits, the relationship between entrepreneurship and fulfilment
and well-being is critical. This paper presents an overview of the well-being concept, related research,
and its relationship to entrepreneurship in the literature review.
Well-being is a crucial component of living a happy and meaningful life, and it is linked to people's
ability to work, form positive connections, and experience positive emotions (Seligman, 2012). Scholars
of entrepreneurship and management are increasingly interested in the origins and effects of happiness
(Shepherd & Patzelt, 2017; Stephan, 2018; Shir et al., 2018; Wiklund et al., 2017). Entrepreneurship
frequently energizes constructive change by bringing about ground-breaking economic or social
breakthroughs that benefit society. Entrepreneurship can also be a source of personal growth,
development, and happiness (e.g. Shir, 2015; Stephan, 2018). Unlike most traditional occupations,
entrepreneurs have a level of independence and control that allows them to gain more meaning from
their work, develop their natural talents and skills, and engage in meaningful activities through self-
directed projects (Shir et al., 2018; Wood et al., 2016).
1.1.1 Definition of keywords and concepts
• Crowdfunding: “the practice of funding a project or venture by raising money from a large
number of people who each contribute a relatively small amount, typically via the internet”.
(Oxford dictionary).
• Crowdfunder: this is defined as “a person or organization that puts money into financial
schemes, property, etc., with the expectation of achieving a profit.” (Oxford dictionary).
• Entrepreneurs’ wellbeing: this is defined as “the experience of satisfaction, positive affect,
infrequent negative affect, and psychological functioning concerning developing, starting,
growing, and running an entrepreneurial venture” (Johan et al., 2019).
• Liability of Newness: The liability of newness phenomenon describes the chance of an
organization dying during its life cycle. It states that the chance of dying is most significant at the
time of an organization's founding and reduces as the organization becomes older.
• Venture capital organization: “Venture capital (VC) is a form of private equity and a type of
financing that crowdfunders provide to startup companies and small businesses that are believed
to have long-term growth potential. Venture capital generally comes from well-off crowdfunders,
investment banks, and any other financial institutions” (Investopedia, 2021).
• Bootstrapping: Bootstrapping is a term used to describe a situation in which an entrepreneur
launches a business with minimal money and no outside funding. When someone tries to start
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and build a business with their own money or the new company's operating profits, they are said
to be bootstrapping (Investopedia, 2021).
• Capital investment banks: Investment banking is a branch of banking that deals with the
development of capital for other businesses, governments, and other organizations (Investopedia,
2021).
• Commercial banks: A commercial bank is a financial organization that accepts deposits,
provides checking account services, makes various loans, and provides people and small
companies with basic financial products such as certificates of deposit (CDs) and savings
accounts. Most people do their banking with a commercial bank (Investopedia, 2021).
• Business Angel: This person invests in a company or a company's start-up, usually in exchange
for convertible debt or ownership equity. Angel crowdfunders typically fund start-ups in their
early stages, when most other crowdfunders are hesitant to back them (Wikipedia, 2021).
1.2 PROBLEM
The fiscal situation for the new startup business and how they source funds have altered over the
years and have become more attractive to scholars. Every funding tool brings benefits and
drawbacks to a new startup venture. The businesspersons that start new venture business faces
challenges which are asymmetric information problems and agency costs. (Broadway et al., 2011).
Being an entrepreneur may be a rewarding experience both personally and professionally. Acting as
"one's own employer" gives greater self-determination and meaningful employment opportunities
than most other occupations (e.g., Shir, 2015; Stephan, 2018; Wiklund, Nikolaev, Shir, Foo, &
Bradley, 2019). Despite these advantages, entrepreneurship can have a negative psychological and
physiological impact on people. Entrepreneurship entails taking risks in the development, launch,
growth, and management of a self-contained business and includes both growth-oriented and 'daily'
self-employment scenarios (Welter, Baker, Audretsch, & Gartner, 2017). This type of job can be
highly stressful (Fernet, Torrès, Austin, & StPierre, 2016; Wincent & rtqvist, 2009), and it
frequently involves high work intensity in a resource-constrained context (Rauch, Fink, & Hatak,
2018; Wincent, rtqvist, & Drnovsek, 2008). (Rauch et al., 2018; Stephan, 2018).
The challenges of entrepreneur wellbeing can be experienced at any point throughout the business
(Stephan, 2018). However, most of the factors associated with ill-being are experienced when
encountering entrepreneurs' greatest challenge: funding a start-up (Williamson, et al. 2021). This is
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significant because most entrepreneurs experience their first attempt at failure when they pitch their
ideas and seek funding.
Different funding sources present their challenges, which negatively affects the entrepreneur and
their business. For crowdfunding, the challenges are associated with establishing trust. Many
people are considering crowdfunding as a way to break into the industry. They desire to market and
share their original ideas or expertise. The only difficulty is that without expertise comes a lack of
exposure, which means potential investors have little to base their trust on (Welter, Baker,
Audretsch, & Gartner, 2017). This problem reflects throughout the interaction between
Crowdfunder and entrepreneurs throughout their encounters. This trust issue stresses out most
entrepreneurs as they may constantly be under pressure to earn the trust of their investors. This
pressure coupled with other challenges associated with Crowdfunder-entrepreneur relationship as
identified below contributes to the state of wellbeing of the entrepreneur and the business success
(Rauch et al., 2018).
The proposed topic of investigation is based on research in entrepreneurial finance. Even though
crowdfunding as a new fund-raising system can help new businesses get started by providing easier
access to capital, it also presents some difficulties due to the principal-agent relationship that occurs in
the crowdfunding system. The pricing of equity, moral obligations, and challenges with unskilled
investors, problems with the recapitalization, realignment, and the risk of generating a new economic
bubble are all common ethical concerns regarding equity-based crowdfunding. According to
Belleflamme, Lambert, & Schwienbacher (2013), crowdfunding allows businesses to use behaviour-
based price discrimination. A profit-driven company may be prone to focusing too much on earnings,
resulting in a reduction in the quality of its services. When market estimates are inadequate,
entrepreneurs set benefits in a campaign (De Buysere et al. 2012). The equity-based crowdfunding
strategy brings together investment risk and novice investors (Bradford 2012). The above poses a threat
to the successful relationship between the two parties leading to business failures on the part of the
entrepreneurs.
Another important factor influencing the entrepreneur-crowdfunder relationship is that; the principal
(crowdfunder) has little control over how the agent (entrepreneur) spends their money, even as the
investment process may have shortcomings. Crowdfunders consider the economic and financial
indicators of the crowdfunded project and certain less visible and behavioural elements of entrepreneurs
and crowdfunding platforms. The proposed research subject will consider the aspects of this
relationship.
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What obstacles do entrepreneurs encounter in business relationships through crowdfunding? In what
ways can these obstacles be bypassed? Do entrepreneurs usually achieve the goal of increasing profits
after engaging in crowdfunding based on crowdfunders’ relationship influences? These are the
questions this study would attempt to answer.
1.2.1 Research Purpose
This thesis aims to look into how the relationship between entrepreneurs and crowdfunders is defined.
That is-, by using the theoretical framework, entrepreneur wellbeing in equity-based crowdfunding, to
investigate aspects of the entrepreneur-crowdfunder relationship that are indicative of success in terms
of entrepreneurial wellbeing.
1.2.2 Research Approach
By looking at existing theoretical frameworks and by getting the views and opinions of recipients of
crowdfunding funds, this paper wishes to have a clear understanding of entrepreneurs' wellbeing and
their relationship with crowdfunders after successful equity crowdfunding. For the author to be able to
understand an entrepreneur-crowdfunders’ relationship, the research was based on deriving data from
entrepreneurs using thematic analysis. Hence, this study collects empirical evidence from
entrepreneurs who have had crowdfunders who successfully invested in their companies via equity
crowdfunding.
1.2.3 Research Question
The above-written purpose narrows down to the research question, which serves as a guideline for this
thesis.
• How does the relationship between the entrepreneur and crowdfunders affect entrepreneurs’
wellbeing in terms of business?
• What is the strength of the relationship between entrepreneurs and crowdfunders in Sweden?
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1.2.4 Perspective
This thesis focuses on the entrepreneurs who have participated and succeeded in crowd funding. It
highlights how the relationship between crowdfunders and entrepreneurs is interpreted as successful
from the viewpoints of the entrepreneurs. This perspective best fits the purpose of this thesis as the
entrepreneur is actually the ‘doers’ who are expected to put the funds to run a business effectively and
are at the receiving end of business success or failure. This perspective is reflected in the result analysis.
1.2.5 Delimitation
This research will focus on Swedish entrepreneurs who have completed successful equity crowdfunding
campaigns and have operated their business for a while afterwards. As a result, other methods of
crowdfunding were only mentioned briefly.
Because of the writers' time and financial constraints and the fact that the author lives in Sweden,
Swedish entrepreneurs were picked as a delimitation. This was also true when it came to selecting
successful entrepreneurs; additionally, unsuccessful entrepreneurs only experience equity crowdfunding
until their campaigns are completed, making successful entrepreneurs better suited for the purposes of
this thesis.
1.3 Limitation
The area of entrepreneurial investment is wide. When it comes to investing in startups, many various
sources are accessible. This bachelor thesis will focus on the important common ones – entrepreneur's
wellbeing, crowdfunding, and crowdfunders, small and medium-sized enterprises. Recently, it seemed
that crowdfunding is a substantial financing source. Crowdfunding will be introduced and described in
detail. Several familiar terms are used for crowdfunding, such as crowd financing and
Equity crowdfunding. Nevertheless, the term 'crowdfunding will be used exclusively in this work.
Crowdfunding for Business ventures also will be examined. Here, for later research, only equity
crowdfunding will be considered. This bachelor thesis will study entrepreneurs' well-being, SMEs, and
crowdfunders.
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2.0 LITERATURE REVIEW
This chapter provides a thorough background on the existing research question and an explanation of
the theories discussed in this work. This chapter will also present the literature search conducted to
obtain the data.
Frame of Reference:
A literature study was conducted at the outset of this paper by reviewing academic publications,
journals, websites, and books to acquire the required secondary data. The purpose of this review was to
provide a foundation or overview of the problem and, as a result, acquire a comprehension of the
analyzed problem to produce a solution. Theoretical framework contains concepts, models, and theories
relevant to the study issue. An existing literature review linked to the research question was conducted in
order to produce a more in-depth understanding of our topic A literature review also aids in the
identification and evaluation of potential research topics, evaluate other people's contributions to
knowledge and point out any flaws (Hussey, 2014).
The literature review was conducted using the internet as the primary source and databases such as
ProQuest, Google Scholar, and Researchgate to locate relevant academic papers. When looking for
literature on the internet databases, key search words were crowdfunding, entrepreneur well-being,
investor-entrepreneur relationship, business funding, entrepreneurial success, and equity crowdfunding.
"Well-being" and "entrepreneur" were used as search terms by the author. The first term was searched
with and without a space between the two words (wellbeing and well-being). It included quotation marks
so that the search engine would recognize both words together. The second term was searched with and
without an asterisk so that the search engine would find all possible variations. The author only selected
peer-reviewed literature related to the notion of "entrepreneur Well Being", “crowdfunding and
entrepreneurs” and “relationship between investors and entrepreneurs” to sustain quality in the study.
The author searched using the term- “crowdfunding in Sweden”, and on another term, the author
searched for the “relationship between crowdfunding and entrepreneurs”.
The initial phase involved identifying a number of articles, journals, and research papers. The data was
extracted keeping the most recent publication period in mind, as the author wanted to look at current
patterns in the research. Following that, the author filtered out any documents that were not peer-
reviewed and compared lists to eliminate duplicate publications. The author then examined each article's
abstract to ensure that all of the publications chosen were, in fact, relevant to the study question.
The journal- “Entrepreneurship and well-being: Past, present, and future” authored by Wiklund,
Nikolaev, Shir, Foo, & Bradley, (2019) was pivotal as a foundation for the search of related documents.
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The search results also led the author to explore other financing and financial terms related to the topic
of interest. The further search produces the keywords defined in the introduction as a term of interest.
As the work progressed, several other searches was conducted centring terms as startup funding,
thematic research method, questionnaire designs, and specific articles of interest referenced by
preliminary documents obtained.
2.1. CROWDSOURCING
Kleemann et al. (2008, p.6) defined crowdsourcing as 'when a profit-oriented organization outsources
specific tasks for making or selling its products to the general public in the form of an open call over
the Internet". In recent times, Belleflamme et al. (2010) and Schwienbacher&Larralde (2010) are the
few studies that have provided models explaining the concept of crowdfunding. Using modern
organizational theory, Belleflamme et al. (2010) built two models describing the idea of
crowdfunding. In their first model, the authors discuss the conditions under which crowdfunding is
preferred to traditional forms of external funding. This was done by connecting crowdfunding with
pre-ordering and price discrimination. For the second model, the author considered crowdfunding to
make consumers aware of a product. The authors provided theoretical underpinning, which led to an
empirical finding that non-profit organizations tend to be more successful in using crowdfunding.
Based on these models, Belleflamme, Lambert &Schwienbacher (2014, p.4) argue that "the concept
of crowdfunding comes from a broader concept of crowdsourcing, which involves using the crowd to
obtain ideas, feedback, and solutions to develop corporate activities."
The case of Schwienbacher & Larralde (2010), using a case study based on the French market,
described factors that affect entrepreneurial preferences for crowdfunding as a source of finance.
Some of these factors are inadequate pre-existing resources, risk, moral hazard, and information
asymmetry, organizational form, control preferences, and amounts required by entrepreneurs. Their
study provided a detailed explanation of the different business models used to raise money. These are
donations, passive investments, and active investments by the crowd. In a related study,
Schwienbacher & Larralde (2012, p. 4) defined crowdfunding as "an open call, essentially through
the Internet, for the provision of financial resources, either in the form of donation or in exchange for
some form of reward and voting rights to support initiatives for specific purposes."
Other authors such as Harrison (2013) and Mollick (2014) differ with the context and scope of
crowdfunding. According to Harrison (2013), crowdfunding demonstrates the removal of
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intermediaries or "middlemen" between the finance market and the development of new
institutional forms. This is because crowdfunding platforms allow founders and funders to connect
and interact directly. Mollick (2014) added that earlier studies ignored two essential elements in
defining the concept of crowdfunding. These are (i) the goal of the founders and (ii) the funders'
goals. These elements may significantly affect how founders and funders interact or their
relationships.
Contrary to Schwienbacher & Larralde (2010), Mollick (2014) identified four primary forms of
crowdfunding. These are lending, donation, reward, and equity-based crowdfunding. The intent goal
of the entrepreneur determines which of these forms of crowdfunding is used; hence a form of
crowdfunding attracts different types of crowdfunders.
In the case of lending-based crowdfunding, crowdfunders lend money to entrepreneurs with the
expectation of a rate of return for their investment (Frydrych et al., 2014). These are similar in
method to the traditional loans provided by financial institutions to entrepreneurs where they
expected to pay interest (or financial returns) on credit. For donation-based crowdfunding,
crowdfunders do not think of any return on their investments, and the founders are generally social
entrepreneurs such as nonprofit organizations (Frydrych et al., 2014; Lehner & Nicholls, 2014).
About reward-based crowdfunding, entrepreneurs are seen as creators or founders and crowdfunders;
on the other hand, crowdfunders are seen early customers and co-creators instead of the "traditional"
crowdfunder (Frydrych et al., 2014). However, equity crowdfunding provides crowdfunders with an
opportunity to part-take in the future cash flows of a firm. Thus, the entrepreneur offers a specified
amount of equity in the company to a group of crowdfunders through an open call on a crowdfunding
platform (Ahlers et al., 2015).The concept of equity crowdfunding can also take place in other forms,
such as royalties, returns on future acquisitions, or an initial public offering in exchange for capital
(Mollick, 2014).
2.2. STAKEHOLDERS
Stakeholders in crowdfunding can be classified into three groups, according to Norman (2008) and
Belleflammeet. (2014). These are (i) entrepreneurs seeking funding for their projects, (ii) crowdfunders
willing to invest in a specific project, and (iii) the matchmaking crowdfunding platforms acting as
intermediaries between entrepreneurs and crowdfunders. It should be noted that entrepreneurs are
usually both private persons and organizations (Gerber et al., 2012; Verstein, 2011; Belleflamme et al.,
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2014; Bradford, 2012; Schwienbacher & Larralde, 2010). Most existing literature about the
crowdfunders-entrepreneurs relationship is based on either agency or trust theory. Nonetheless, few
studies have combined the two approaches (the idea of agency and the theory of trust) in investigating
the crowdfunder-entrepreneur relationship in crowdfunding (Ley & Weaven 2011). This is known as
the trust-agency crowdfunding model.
There are two parties (the principal and the agent) involved in a potential conflict dilemma in the
theory of agency. Whereas the principal delegates responsibilities and tasks, the agent performs those
tasks on behalf of the principal (Jensen & Meckling, 1976). According to Eisenhardt (1989), the
agency theory is concerned with three main problems emanating from the principal-agent relationship.
These problems are (i) divergence objectives between the principal and agent, (ii) high cost in
monitoring the activities of the agent by the principal, and (iii) the principal may prefer different
courses of action than the ones decided by the agent, often as a result of various risk preferences. In
order to resolve these problems, a contract between the principal and the agent was established. The
trust model by Mayer et al. (1995) and McKnight et al. (2002) has been the foundation of explaining
the trust relationship between entrepreneurs and crowdfunders within the crowdfunding context. The
trust model believes that crowdfunders' trusting beliefs in the projects proposed by the entrepreneur
may result in whether or not to invest in a specific equity crowdfunding project.
Furthermore, the perceptions in the form of institutional-based trust in the equity crowdfunding
platform and the existing relationship among their crowdfunders can influence investment decisions.
The trust-agency model combines the theory of agency and the theory of trust. A detailed explanation
of the trust-agency model was provided by Kitano (2017).
2.3. ADVANCEMENT OF ENTREPRENEURSHIP FROM THE CLASSICAL VIEWPOINT
It is observed that economists have always understood that entrepreneurs are considerable and also
economic performers, but it has demonstrated challenges to incorporate the entrepreneur into
financial theory. In the past centuries, many economists have investigated and searched for the role of
an entrepreneur. One of the previous pioneers. Richard Cantillon (1697-1734) explains the
entrepreneur as a risk-taker who obtains labor force and raw materials when the end-product cost was
still unclear. Cantillon (1725), said that the role of the entrepreneurial in the field of Economics aspect
as profit maximization.
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Cantillon argued that entrepreneurs were precisely engaged in the symmetry of demand and supply.
At the same time, regarding the entrepreneur's function as generating value by moving resources into
a productive business zone from less productive ones. In his opinion, Schumpeter (1942) explains the
entrepreneur as an innovator, bringing the new combination into actual practice. Schumpeter affirmed
that the role of the entrepreneur is an innovator who executes change in a financial system by
launching new products of manufacturing goods, identifying new export markets of supply, or
establishing new types of business. Schumpeter said that an entrepreneur is an uncontrollable
economic force. He further underlined the meaning of a devastating, innovative process by which
newly launched products collapse the existing one. Israel Kirzner (1979) disagreed that an
entrepreneur generates profit from past unknown and undiscovered chances. Entrepreneur finds
opportunities to utilize price discrepancies, usually due to excess goods in one location or unsatisfied
purchaser demand.
Entrepreneurs, in their explanations, concentrate on the disputes that are cross to become an
entrepreneur. They have given broader and somewhat more detailed descriptions. For example, their
narrative of entrepreneurs has grown beyond traditional commercial business holders to include the
'social value' created by social entrepreneurs and social enterprises (Kaleem et al., 2017).
Success brings satisfaction to people and improves the firm's performance; hence the more optimistic
the entrepreneurs will think. According to Lyubomirsky et al. (2005), positive emotions could stir up
people to feel, think and react more energetically when acquiring resources and performing their tasks.
Consequently, entrepreneurs with optimistic feelings are less vulnerable to difficulty and can overcome
business challenges and problems.
2.4. WELLBEING
In regard to designing, launching, growing, and running an entrepreneurial venture, entrepreneurial
wellbeing is characterized as the experience of satisfaction, positive affect, infrequent negative affect,
and psychological functioning (Johan et al., 2019). Wellbeing can be categorized into four steps:
Orientations, Behaviours, Experiences, and functioning. Huta (2015) said that "Orientation is what an
individual seeks. Behavior is what an individual is doing. Experience is how they feel. And lastly,
functioning is how perfectly the person does, and this represents the ways of living that are what an
individual chooses to do in their lifetime. (Huta, 2015). Functioning is how well the individual is doing
in a lifetime and how far their accomplishments, abilities, healthy habits, and proper long-term
19
functioning, for example, are being skilled relishing, prioritizing satisfaction, self-regulation, and
achieving maturity. The Behaviours: what kind of activities the people involved in, e.g. businesses,
attending parties, school lectures or writing down a future goal, etc. The last two categories deal with
the outcomes of wellbeing.
2.4.1. ENTREPRENEURS’ WELLBEING
Most research on the relationship between entrepreneurship and wellbeing has taken one of two
approaches: using general wellbeing measures (such as life satisfaction and positive affect) or focusing
on context-specific business- and work-related satisfaction (e.g., Block and Koellinger, 2009; Uy et al.,
2017). While both of these sets of indicators provide useful information about the wellbeing of
entrepreneurs, it is unlikely that they accurately reflect the overall satisfaction that people experience as
a result of their entrepreneurial activities. Despite decades of study on wellbeing in life and work, the
measurement and definition of entrepreneurial wellbeing as a distinct experience of wellbeing has
gotten little attention thus far. In reality, the psychology and organizational work literature see non-
work context-specific measures of wellbeing as adequate and independent indicators of wellbeing
(Page & Vella-Brodrick, 2009).
Earlier measurements of wellbeing in entrepreneurship do not reflect the subjective and core general
experience of wellbeing in entrepreneurship. They focus on either one's overall life assessment or on a
feature of the firm or the work itself. Entrepreneurs who report overall positive life satisfaction and
satisfaction with business performance, for example, may simultaneously say lesser satisfaction and
contentment with life as an entrepreneur, implying that the construct is context-specific. Individual
wellbeing experiences in this domain are likely to be better reflected by a broad and more direct
measure of wellbeing in entrepreneurship (Shir, 2015). As a result, more context-specific
conceptualizations and measures of subjective wellbeing in entrepreneurship should provide a fuller
picture of the subjective rewards that entrepreneurs experience.
Johan et al. (2019) thus define entrepreneurial wellbeing as "the feeling of satisfaction, positive affect,
infrequent negative affect, and psychological functioning in relation to developing, launching, growing,
and running an entrepreneurial business" based on these broad developments.
Self-acceptance, personal growth, purpose (meaning), mental health, mastery, autonomy, and happy
relationships are all examples of psychological functioning. They proposed this as a starting point for
future research on theorizing and quantifying entrepreneurs' subjective experiences and related
objective human and environmental factors that influence wellbeing when planning, launching,
expanding, and running a business.
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It's rare for an entrepreneur's journey to be without bumps (McMullen and Dimov, 2013). Instead, the
entrepreneurial journey is frequently an emotional rollercoaster, with highs and lows in exhilaration and
fulfillment, as well as stress and resource exhaustion. The majority of new firms fail, and those that do
succeed confront obstacles in establishing external partnerships with suppliers and consumers and
developing internal routines and relationships among staff. Despite this acknowledgment, the current
entrepreneurship literature portrays a static perspective of entrepreneurship's wellbeing benefits. These
studies concentrate on the benefits of self-employment, as well as the impact of moods and emotions on
entrepreneurial outcomes at a certain point in time (Delgado-Garcia et al., 2015; Stephan, 2018)
When entrepreneurs’ wellbeing is deemed satisfactory, they become better at meeting up their
challenges; they think about the upcoming corporate development and keep the positive aspect of their
mood around them—as a result, affecting employees to put more effort into committing and improving
the firm performance. When the activities of entrepreneurial facilitate the entrepreneur fully involved
in the work, or we can say that is the path of the right way (Venkatasubramaniam & Ramanakumar,
2018). They regard it as the way to realize the value of life. Based on the positive emotion, the
entrepreneur may aspire to invest extra time and energy in corporate management and entrepreneurship
to boost the firm's accomplishment. Activities in entrepreneurs involve enhancing, improving the
business social network.
Network activities directly impact the firm growth and accomplishments Zhao et al. (2010). After the
formation of the organizations, the new venture will depend on the social network to obtain the
information and critical resources in a long time—the relation in social network help in promoting new
venture business growth and benefiting the enterprises. Individuals with proactive personalities are
beneficial to bond social relations with others; he further obtains resources and demonstrates more
personal initiatives to improve performance.
Hence, entrepreneurs with relationship-oriented ambitions are more pleased to act proactively and
extend their social network. Thompson (2005) & Cardon et al. (2009) said that a high volume of work
involvement characterizes entrepreneurial activities, a great accomplishment of motivation and
eagerness to achieve excellence. The condition needs entrepreneurs to display great personal ideas
(Massolution, 2012) and inspire them to conquer problems and challenges that they may face. But on
the other hand, positive emotions help entrepreneurs gain access to necessary financial and human
resources by enlarging entrepreneurial networks and social interactions.
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But we need to know what entrepreneurial networks and networks are? We will define what network
is? Based on the National Commission on Entrepreneurship (2001) describes the network as the
system of connection to people or group of people with a common interest, while the entrepreneurial
network is a part of an entrepreneur, which is prepared both informally and formally, with the object
of growing the success of the members in the business activities. However, it is linked with the
current personal contact from outside the business firms, for example, company sellers of raw
materials, governing bodies, and retailers (Richard et al., 2018).
When entrepreneurs find satisfaction in entrepreneurial activities, they perform energetically and show
great excitement to unrelenting entrepreneurship. Entrepreneurs are particularly great at "exploiting"
their satisfaction to promote firm performance. (Robin & Sato, 2011). If the business owners are
happy and satisfied, they are more motivated to put all the personal resources to the organization and
struggle for better performance.
Entrepreneurship encourages wellbeing by fulfilling an individual's basic emotional needs.
Participating vigorously in launching new venture business activities suggests a distinctive state
of psychological wellness. In this case, several entrepreneurs encounter more pressure and have
a higher workload.
In the introduction of starting a new venture, it may be complicated and unsure factors that
entrepreneurs will consider, and entrepreneurial commitment appears to be disadvantageous to
psychological health. Many entrepreneurs fail to change from thought to action in entrepreneurship.
For those businessmen that succeed nevertheless, entrepreneurship is an excellent chance for
development, personal advancement, and discovering meaning in the early stages of starting a new
business. When there are complex and uncertain factors to consider, entrepreneurial engagement seems
detrimental to mental health. It may explain why many fail to transition from thought to action in
entrepreneurship. The Entrepreneur in Sweden is over 100,000 that started business compared to earlier
10years.However, between the years 2010-2019, the set-up business in Sweden is over 649,000. The
local news agency mentioned the new limited companies doubled from 212,000 to 435,000 Henriksson
(2020).
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2.6. METHODS OF FINANCING THE NEW STARTUP VENTURES
There are two categories of finance: the traditional method, e.g., bank loan, business angels, venture
capital and crowdfunding, e.g., passive investment, active investment, and donation. Kothaet al.
(2012) demonstrated that most entrepreneurs with experience in startups businesses could get
additional funds from crowdfunding and traditional finance compared to entrepreneurs without having
no experience. Start-up new ventures are most interesting in the stakeholders who can knowingly
hasten the development of the investment through their venture capital and support the business
relationships that shareholders tend to have and which are crucial for the company's growth.
The entrepreneurs need external financial backup when starting a new venture (Meyskens & Bird,
2015), But unluckily, finding the fund is not an easy job for most entrepreneurs since their new startup
business has no track history that the crowdfunders can use to assess the risk. Vance et al. (2005).
It is suitable for a start-up business to start from their end by being independent without the
interference of third-party investment, and it is called bootstrapping. Bootstrapping is launching a new
venture with your money without the help of the crowdfunders, nor is part of the business given in
exchange for the funds (Wang et al., 2019). Bootstrapping is to pull oneself in one's bootstraps. But in
real life is complicated. Also, is the foundation of entrepreneurship? The good things about
bootstrapping are the entrepreneur will have full control of its business.
2.6.1. Traditional approaches to financing the startup new venture.
Venture Capital
Venture capital established; crowdfunders provide equity funding. Madison Park Group (2020). It is
another official source of funding—the money deposited into firms in exchange for equity
proprietorship. If the organization is growing, then the shareholders will give the right to add additional
extra cash into the venture at a fixed price, meaning that they will boost their shares in the active
project.
The diagram below shows "how the entrepreneur needs funding, the crowdfunders that want high
returns, investment bankers who need companies to sell; and the venture capitalists who make money
for themselves by making a market for the other three" (Zider, 1998).
23
Figure 1- How the venture capital industry works
According to Jacobs (2002), a corporation eager to use venture capital in continuing innovation must
gain a conviction of public crowdfunders that there are tactical pledges and finance return behind the
business venture. However, he further said that venture capitalists offer businesses not only with
money but with devoted knowledge, expertise, and active participation. The National Venture Capital
Association defines VC as "a segment of the private equity industry which focuses on investing in new
companies with high growth potential and accompanying high risk" (NVCA, 2017).
This type of fund is viewed as a modern entrepreneurial financial modernization. Obtaining venture
capital is essential for launching a new venture for countries that hope to link to highly advanced
economies. Venture capital provides monetary support for uncertain business plans by Small, medium
enterprises that show up prospective but not proven plans. If the Venture capital is convinced that a
business plan shows a perspective, it would finance in such business and give the necessary funds
while participating in the risk.
According to Maula & Lukkarinen (2018), the control of venture capital in developed nations has
played a vital role in enhancing SME development through the help of equity capital.
Venture capital is a technique of funding intended to offer equity financing to small firms, with the
critical return to crowdfunders as share gains rather than from stocks. Crowdfunders are captivated
by VC investments because of the prospect of huge profits from later sales of the business's shares.
Thus, they are excited to accept the higher risks involved compared to traditional loans.
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The venture capital funds financed the new startup businesses with the high level of growth
possible. However, they might take part in take-overs more reliable firms. The involvement time of
venture capital is between two to five years, after which they will swap the shares of the company
on a stock market through an initial public offering (IPO),
2.7. BUSINESS ANGEL
Business angels are essential for small and medium enterprises because they provide more money.
They are hands-on stakeholders and contribute their skills, experience, and knowledge in the
enterprises they invest in. They are prosperous people with fantastic business knowledge or experience,
spending and giving their wealth.
The business angel crowdfunders fund more than 16 times as often as venture capitalists (VCs) in seed
ventures. (Torres, 2016). Venture Capitalists tend to invest in ventures after development phases since
they offer shorter exit cycles and reduce period levels of risk. Based on this, business angel
crowdfunders are more vital in the early stages. Since current investment from business angels is the
primary requirement for gaining investment from VCs, growing the number of business ventures that
get funding from business angels is of interest to all prospective VC crowdfunders (Maxwell et al.,
2011). Businesspersons think business angels without proper small business knowledge to be of limited
use as they cannot give suitable contributions (Schwienbacher & Larralder, 2010). The entrepreneur's
abilities substantially impact the business angels' selection outcomes. These presentations to the BA
usually take between 15 and 30 minutes. However, it can also be in the form of one- to five-minute
elevator pitches, which are almost delivered at an early stage of the crowdfunder decision-making
process – frequently before stakeholders have met the entrepreneurs and see their business plan or
model.
Business angels look for entrepreneurs who are "trustworthy "and straightforward to display a strong
work ethic', 'understand what it takes to make their business succeeds' and have a 'realistic notion of
how to estimate their business (Tillvaxtanalys, 2020).
During the initial screening, two kinds of trust-creating indicators are beneficial to business angels
wanting to invest in a startup firm: e.g., the commitment and value indicators. While business angels
obtain broad information from the financier, the latter has all the incentive to present only if
25
beneficial. Hence, business angels require from the entrepreneur's seminar an indicator of a reliable
measure of the value they expect from the planned venture. Besides, building on ideas drawn from
organizational economics, the increase in a business risk connected with new endeavours outcomes in
business angels desiring but a commitment indicator on the part of the businessperson; in other
words, they want a sign of the commitment by the entrepreneur to the new startup venture. Without
such indicator of anticipated value, a business angel may act unadventurously, underestimate the new
start venture, and decide not to fund the investment since it is perceived not to have a satisfactory
return (Prasad et al, 2010).
2.8 CROWDFUNDING
Crowdfunding is a subgroup of crowdsourcing. Based on Belleflamme, Lambert and Schwienbacher
(2013, 8) state:
"Crowdfunding involves an open call, mostly through the Internet, for the provision of financial
resources either in the form of donation or in exchange for the future product or some form of reward
to support initiatives for specific purposes.”
While Steinberg, et al. (2012) stretch a similar definition, crowdfunding as "open call, basically over
the Internet, for the financial resources either in the form of contributions (without rewards) or in a
swap form of voting rights to support projects for specific purposes. De Buysere et al. (2012) defines
crowdfunding as a collaborative effort of several people. They are part of the system and fund their
resources to help ventures instigated by other people or corporations.
Crowdfunders are the people who provide funds and are called crowd funders (Lambert,
&Schwienbacher. 2013). There are different forms of giving money, starting from loans or equity
purchases. The main idea is that funds do not come from a small group of crowdfunders, instead of
from the "crowd" whose member contributes a small amount of money Belleflamme et al. (2011, pg.
2).
Though the scope of fiscal alternatives accessible for any entrepreneur is somewhat broad, it appears
that it is not wide-ranging enough. Crowdfunding is the call for money from society has grown to be
an essential source of financing for entrepreneurial to begin and expand new ventures. (Bruton et al.
2015). The bank loan or venture capital can be utilized to satisfy a necessity for a substantial amount
26
of money. The entrepreneurs with fewer extreme requirements still need to depend on families,
friends, or private loans, which their interest rate is high and their savings. The lack of funding is a
problem for a new startup venture due to successive business ideas pitches, inability to convince the
potential stakeholders, and absence of the agreeable pledge that could be given to crowdfunders.
Belleflamme et al. (2013).
According to Frydrych, Bock, Kinder & Koeck (2014) & Mollick, (2014), There are four main ways
to crowdfund a project or venture, lending donation, reward, The use of these different types of
crowdfunding varies according to the purpose and intent of the entrepreneur who wishes to involve
in it. Hence other crowdfunding type attracts different types of crowdfunders. The difference
between the crowdfunding methods lies in the goals of the entrepreneur and crowdfunder, also on the
value the crowdfunder receives in return for their investment (Mollick, 2014).
The focus of this thesis is based on equity-based crowdfunding, according to Martínez-Clément et al.
(2018). Equity crowdfunding is the online financing mechanism for early-stage entrepreneurial
ventures. In line with fantastic market development, a basis of investigation about equity
crowdfunding has begun to build up rapidly.
Mamonov et al. (2020) described equity crowdfunding as the vital expansion that triggered a marked
change in the impacts of social media on entrepreneurial investment, while Wang et al. (2019) built it
as a resource for early-stage new venture funding. In supplement to presenting an online launching
for the entrepreneur business idea pitching procedure and crowdfunder-part financing activities,
equity crowdfunding platforms. Equity crowdfunding platforms allow for a high ranking of digital
visibility. The potential crowdfunders usually can perceive actual-time the total amount invested and
the number of crowdfunders committed to a funding campaign (Kim & Viswanathan, 2018).
Equity crowdfunding is the mere crowdfunding scheme that lets donors become collaborators to the
corporation they grant money. By using the platform, the entrepreneur's business proposal could make
crowdfunders assess the profitability before becoming their new collaborator to their firm.
The campaign necessitates changes to the firm business regulations and the article of incorporation,
with possible impacts on the firm's economic structure, e.g. the entrepreneur has determined
minimum crowdfunders invested in becoming the firm shareholder and the proportion of the capital
the organization will be proposed subscription. By the end of the successful equity crowdfunding
27
promotion, the firm financial formation will be revised to reflect the growth of the firm's equity.
Additionally, the organization will look into its value before receiving the capital from the (crowd).
These are used by many of the crowdfunders to get some ideas of the company worth value. And it
can be a variation of the price and the share face value that it is to say, the rate that surpasses the face
value of the company receiving shares (Gilcreast & Jones 2018).
In crowdfunding in inequity, the entrepreneur proposes a certain amount of equity in the company to a
group of crowdfunders through an open call on a crowdfunding platform (Ahlers et al., 2015). The
process could be compared to the traditional investment mechanism, where the entrepreneur values the
venture and offers potential crowdfunders shares for a specific price based on the valuation (Frydrych
et al., 2014).
The concept of equity crowdfunding can also take place in other forms, such as royalties, returns on
future acquisitions or an initial public offering, in exchange for capital (Mollick, 2014). The
investment process in an equity crowdfunding model may go through three distinct phases (Ordanini
et al., 2011).
First, approximately half of the target capital will be obtained quickly by the rapid and significant
investments from those with direct links with the projects or their creators, such as friends or family.
The second phase is usually a more gradual growth of investment created by the desirability of the
pitch and through word-of-mouth. Many projects fail at this phase primarily because of the inability to
trigger the crowd's interest.
Finally, the equity crowd funding can mobilize social networks in which online participants can share
information, knowledge, and suggestions or select initiatives to support and provide financial capital
(Ordanini et al., 2011). The crowdfunders within equity crowd funding can be divided into active or
passive crowdfunders. In a passive investment, the crowdfunders are solely interested in receiving
financial returns without being involved in the actual process. For the active investment, the
crowdfunders are engaged in the development process by taking different initiatives to support the
entrepreneurial effort (Schwienbacher & Larralde, 2010).
Below, the author attempts to build a picture of the process of equity crowd funding.
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Figure 2- How equity crowdfunding work (from the author of the thesis)
The new startup venture needs funds to succeed in its business ideas, and one of the most vital funds
is money. Usually, the possibilities for wealth creation obtainable to new ventures were limited. They
encompassed mainly from family and friends or the saving from the owner of the business, venture
capitalists, business angels, and seed funding. Based on the authors visualizing and experiences, input
in the giver crowdfunding. (Khan et al., 2017). Lehner (2013) streamlined a suggested diagram of
crowd funding (Fig. 2) above, which recognizes the financiers and their motivations, mediators, and
finally describes crowd funding tasks in detail.
A. Idea: The entrepreneur looking for an opportunity to get funds in financing its
business ideas through a crowdfunding
When entrepreneurs have fascinating and promising projects, business ideas, innovations,
and no possibility of financing them from conventional sources, they recognize the
opportunity in crowdfunding and send an open call over the Internet for fundraising. At this
stage, they present economic information, provide information about their projects/ventures
and do everything over the Internet that appears to be an efficient agent that saves both time
and money, which are so very important for entrepreneurs.
B. Investment Possibilities: The crowd-funder sees the opportunity to put their money
through a crowdfunding
Crowdfunders are willing to support the entrepreneur's business ideas and look out for such an
attractive investment that can participate and be valuable. At this moment, they use crowd
funding platforms to get information on business plans or projects; they expand their abilities to
29
provide them with financial assistance. By swapping thoughts with prior crowd-funders has a
significant role in this aspect.
C. Decision Making: Taking time for decisions making on funding the project
After the crowd/crowd-funders recognize investment opportunities through crowdfunding
platforms, it takes time to decide on that investment. They find the changing and launching as
something new or different that the investment will generate.
D. Funding: Empowering the new startup venture
When the business owner comes up with a considerable amount of funds through a crowd
(people or financiers), then the next options are to implement it. The next step is reward-based.
E. Recompense
Crowdfunding is a powerful tool to acquire cash for projects by getting a neighbourhood of
supporters enthusiastic about participating. The recompense program is the valuable tool a
crowdfunding investment originator has at their disposal. And it may be cash or non-cash and
can be the issuance of debt instruments which is bonds. Schwienbacher et al. (2010) differentiate
the differences between passive and active crowdfunding based on the crowdfunders' reward.
The crowdfunding modes of investment are divided into three, which are donation, passive
and active investment Metzler (2011). When a financier gives money out to entrepreneurs but
is not helpful in decision making but only the share rival of the profit in the organization, this
is referred to as passive investment. This was the situation in which the financing is not
seeking impact over the activities of the entrepreneur business firm that it is in investing in.
(Gilo, et al., 2006).
The more straightforward way for passive investment is the bank loan, as they did not engage in
specific decisions the backer takes. Furthermore, they did not create the chance for the financiers to
become actively involved in the initiative, e.g., provide verdict with the company.
Lastly, the donation agreement is the minimum interaction between the business owner and
crowdfunders. They raise funds for the investment that is seen to be generally attractive. The
30
investments are without the purpose of compensation in the forms of services. This donation can be a
kind of intrinsic value that funders receive for being part of the project, meaning satisfaction and
acknowledgement for helping and supporting the ideas. (Meyskens et al., 2010).
The Relationship between Crowdfunders and Entrepreneurs
The connection between entrepreneurs and crowdfunders is the utmost to building a startup. To start a
journey, presumably practically, is an approach to disagreement that sees negotiation as war during the
fundraising procedure. The entrepreneur and crowdfunder stand to gain financially only if the startup
relationship succeed (Singh, 2005).
But crowdfunders must understand that they only support the entrepreneurs' vision or business ideas.
And they should not be executing the entrepreneurs dream. And this is the essential consciousness to
get. Usually, there could be disagreements on vision and goals, but it must remain just that, disputes.
However, entrepreneurs have to implement and provide on the promise, and if entrepreneurs fail, then
there should be open negotiations about the reasons for lack of success. (Zohar Goshen & Assaf
Hamdani, 2016).
Crowdfunders are not unfair and will be open to a revised plan if they are satisfied with the
justifications. It was the duty of entrepreneurs to convince them, but changes in strategy
immediately after the funds have been raised are not advisable unless there are very compelling
Fernández-Vázquez (2019).
2.8. ADVANTAGES IN PARTICIPATING IN EQUITY CROWDFUNDING
1. Equity crowdfunders purchase the subscribed number of shares of the company. When
crowdfunders are dealing with entrepreneurs, claims, those financing opportunities may bring
incredible returns, e.g.,"Spotify's $27 billion IPO and iZettle's acquisition for $2.2 billion were
big deals no matter where the companies were based" (O'Brien, 2018).
2. Financiers have the chance to easily surf the Cyberspace looking for ventures they are
interested in. To be part of a society is a benefit that fascinates crowdfunders in crowdfunding
involvement (Carvalho et al., 2014).
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3. An equity crowdfunding drive is an excellent justification to show the products and services
and tell your crowdfunders about the company history; by doing that, 100% of the company
objectives will naturally attract the interest of the crowdfunders.
4. The entrepreneur can easily find crowdfunders ready to support his new start venture. The
Cybercafe or Internet lessens the restrictions and prefers an option for people to look for what
they want.
5. Crowdfunding gives advantages to package the sale of equity of products with other valued
goods, e.g.by providing discounts to the future shareholders; by this, the crowdfunder's interest
heightened.
6. Based on the other form of financing, e.g., venture capital, donation, etc. In crowdfunding,
entrepreneurs do not require providing their depositors with control rights (Loreta & Sima,
2013). They should keep the right to make firm decisions by themselves. This is true when it
comes to rewarding crowdfunding, but in the equity part, it is different. Nevertheless,
appreciations to the relation between equity founder and crowdfunder's figures, the
entrepreneur will retain mainstream control compared to other crowd funding types listed
above.
7. The significant advantage is that the entrepreneur is not required to pay back the total amount
invested. Consequently, more capital is accessible since there are no interest or loan
repayments. Besides, the financier takes all the risks; if the firm fails, it loses all its investment.
2.9. DISADVANTAGES IN PARTICIPATING IN EQUITY CROWDFUNDING
I. If the entrepreneur uses social media to look for crowdfunders, it brings several advantages.
Still, it also takes several disadvantages involving the public exhibition of the company and the
business proposal. The financier, the enormous obstacles are connected to the nature of the
money is looking for. They are for the highest part in starting a new venture, and so are
insecure firms planning to invest in them, meaning that the company is exposed to the risk of
illiquidity and fraud. Based on that, crowdfunding gives the prospect to diminish the
prospective harms. These can comment that social media and groups involved are the sources
32
of powerful instruments to prevent the crowdfunders from a commercial failure or to create
entrepreneur's restraint from the wrong attitude.
II. When the entrepreneur started to campaign to boost the cost of administration, they should not
undervalue, particularly for small and medium-sized enterprises that comprise few groups. The
action taken before and after the campaign can lead to a relationship with the crowd, and
hunting for its support is part of it (Loreta & Sima, 2013).
III. The most significant disadvantage for the entrepreneurs and public exposition of the business
proposal is stealing ideas. Crowdfunding involves the risk that the funded organization may
steal the opinions of the entrepreneur that is seeking money for the development of the new
venture through the crowdfunding platform. Based on that, the entrepreneur should consider
the legal aspects when creating the campaign. To avoid the risk, they should look for a
platform that offers legal instruments to solve the problem (Lambert & Schweinbacher, 2010).
33
3.0 METHODOLOGY
This chapter deals with the research approach used by the author: Area of study, the population of
the study, sampling technique and sampling size, method of data collection, and method of data
analysis.
3.1 Area of study:
The survey was conducted in Sweden, which is a Scandinavian nation located in the continent of
Europe; it covers 410,335 square kilometres. A well-known Swedish crowdfunding platform used to
get in touch with the entrepreneur, known as Fundedbyme organization. However, other international
platforms operate in Sweden, such as Kickstarter and Indiegogo, which deal more with reward-based
crowdfunding.
3.2 The population of study:
As a global perspective would be too big for this thesis, the author has chosen to limit the research to
entrepreneurs active in the Swedish market as they would be more easily accessible for the author to
research. Hence the population of the study is all the entrepreneurs who own SMEs (small and
medium-sized enterprises) and who at one point in time raised funds for their project using equity
crowdfunding.
3.3. Sampling techniques
In the author's understanding, sampling is a small population proportion. Sampling is an analytic
process used in statistics. A small unit selection from the population following certain criteria is tested
and observed, and inferences from that sample are thus made for the entire population (Tuovila,
2020). This method allows researchers to use a small sample size to get information. There are over
70,000 entrepreneurs; however, the sampling size will be based on a small proportion of the
population since all of the entrepreneurs are not startups and are not involved in equity crowd
funding, which is the author's area of focus. So, the sampling size will be based on a maximum of 20
entrepreneurs in the Swedish market who engage in equity-crowd funding.
34
3.4. Method of data collection
Data collection refers to a purposive and systematic gathering of information relevant to the study
from the area or unit under investigation. To collect data, a research problem must have clearly
defined; it is an essential stage of carrying out research. To achieve the goal of the data analysis and
interpretation of the result, qualitative method of data collection is used in this thesis. Qualitative data
can be collected through interviews, web surveys, focus groups, observation, diaries, or protocol
analysis (Collis & Hussey, 2014). However, due to the pandemic restriction and the difficulty to
gather together sufficient entrepreneurs who fit the target frame, the author used web surveys as an
optimal alternative.
Web survey: Web surveys, often known as internet surveys, are a type of data gathering method in
which surveys or questionnaires are given to a sample of respondents via the internet, and they can
respond to the survey via the internet. Web surveys can be sent to respondents by email, embedded
on a website, social media, and other methods. Respondents in web surveys complete the
questionnaire using a web browser, and the results are saved in web-based databases (QuestionPro,
2021).
The key reason for the use of web survey adoption is that it allows for a wider reach of target.
Researchers have begun to prefer conducting surveys utilizing online sources in the last decade
because they can send out surveys from their desktops or laptops, and their target audience can react
to them whenever convenient. These surveys also support multimedia data collecting and complex
features like survey skip logic and branching (QuestionPro, 2021).
The feedback from the web survey was summarized using Google form platform and excel spread
sheet was used to give the descriptive presentation of the result.
3.5. Survey and scale development
As the author was ready to collect information from the entrepreneurs in the course of this thesis, the
world at large was going through the COVID-19 pandemic. This limited access to physical contact and
interaction made conducting a direct one-to-one interview with respondents quite impossible.
However, my knowledge and interaction with entrepreneurs I had previously known gave me the
leverage to proceed with using a structured questionnaire.
It is evident that the pandemic contributed severely academic and entrepreneurship sectors. However,
online crowdfunding campaigns increased significantly during the pandemic, especially donations
35
meant for relief from the pandemic (Wenzlaff, 2020), although little is known about crowdfunding for
business establishment during the pandemic.
3.6. Review on the literature on the subject
The questionnaire was targeted to obtain demographic information, the strength and threats of the
relationship between crowdfunders and entrepreneurs, the nature of the impact, and financial
involvement.
Demography questions were designed to determine factors that may influence participants’ responses.
It is often difficult to identify entrepreneurs who had received funding from crowdfunding because they
tend to be reluctant to participate in a study. To overcome this challenge, the author adopted methods
described by Mason & Harrison (2000), which involves sending questionnaires to many individuals
expected to have participated in crowdfunding. This was achieved by the use of a Google form sent out
via mail along with detailed information about the survey.
3.7. Demographic Information of Respondents
The respondents that partook in this result were 20 from the Gothenburg, Östersund, and Stockholm
regions of Sweden. The author did not give particular interest to the geographical location of the
business or the gender of the entrepreneurs as the study focuses on online financial interactions which
are not influenced by demographic information.
3.8. Method of data analysis
The method of data analysis used is the thematic method which is the most common method of
analyzing qualitative data. It emphasizes pinpointing, examining, and recording patterns (theme) within
data. This method was chosen because the author wanted to get a perfect reflection of what
entrepreneurs truly express when asked about their relationship with investors without ruling out the
tune and emotions attached. I think thematic research method helps me accomplish that. It gives a real-
life explanation from the entrepreneurs themselves without subjecting their response to interference
since quantitative methods are based on numbers, hypothesis testing, and result interpretations from
digits, which may not reflect a practical situation in this case study.
Themes are patterns across data sets that are important to the description of a phenomenon and, as
such, associated with a specific research question. Hence the themes become the categories for
36
analysis. According to Boyatzis 1998; Roulston 2001; thematic analysis is a poorly demarcated and
rarely acknowledged yet widely used qualitative analysis method. Qualitative approaches are
incredibly diverse, complex, and nuanced; thematic analysis should be a foundational method for
qualitative analysis (Holloway &Todres, 2003). One of the benefits of using the thematic analysis is its
flexibility which gives the chance to make choices. Boyatzis (1998) defines thematic analysis as a
process for recognizing, evaluating, and reporting data. It slightly organizes and describes your data set
in (rich) detail.
3.8.1 Phases of Thematic Analysis (Braun and Clarke, 2006)
Phases of thematic analysis are similar to other phases of qualitative research and are not unique to
thematic analysis (Corbin & Strauss, 2014). The analysis is carried out in a recursive rather than linear
manner. The codes are extracted, and they are then converted into themes. The researcher regularly
refers to and validates the extracted codes as well as the complete data collection (Braun & Clarke,
2006). In addition, the researcher does the same thing between the steps of study listed below:
1. Familiarizing oneself with the data: First, each word in the content of the interviews and
speeches should be correctly transcribed, and this is one of the most important phases in the
qualitative interpretative investigation. It's worth noting that the placement of a comma might
alter the meaning. Active researchers recommend frequent reading in order to become familiar
with all parts of your data. Before coding, it is vital to read the entire collection of data in order
to gain comprehensive knowledge. Reading the thoughts and possible similarities will generate
the preliminary patterns (Saldana, 2015).
2. Generating initial codes: Making a list of potential ideas based on the data. Sorting the data into
groups based on their importance, then assigning the data their initial codes (Clarke & Braun,
2013). The codes can have explicit or implicit (semantic or latent) meanings that are related to
the most fundamental portion of the data or raw information and can be evaluated in a
meaningful way in relation to a phenomenon. The codes can be constructed based on the sort of
analysis, such as inductive or theoretical, or the precise type of inquiry that has been developed
in your head (Clarke & Braun, 2013).
3. Searching for themes: When the initial codes are produced, the topics are searched from them.
Knowing the codes is required for this. One may have a big list of various codes. The researcher
37
can group comparable codes into a set over time. Each set can be given a name, and a brief
explanation for that name can be written separately (Saldana, 2015). Then attempt to
meaningfully organize the code sets. Some codes are themes, while others are sub-themes, and
yet others are codes that do not yet belong to a theme and must be written temporarily in order to
determine which themes they belong to later, or to extract a theme from them. Consider how
many codes might be combined to create a larger theme.
4. Reviewing themes: Due to overlap, some themes may be blended with others. Or, because of
their homogeneity or shared roots, they may produce new themes in connection with other
themes. Sub-themes can also be isolated and grouped together into a new theme. It's not
uncommon for new themes to arise that didn't exist previously.
5. Defining and naming theme: In this step, one defines a theme and reviews and refines it while
the researcher analyzes. By identifying and refining the theme, one can arrive at the essence of
the theme. One can determine what the topic says, what it is about, and what parts of the data it
covers. The researcher should determine the elements that are intriguing about the data and how
they become important, in addition to interpreting the data substance. One should also identify
whether each theme has a sub-theme (s) during refinement. Sub-themes are themes within
themes, and a collection of sub-themes creates a complicated and large theme that demonstrates
the data's meaning hierarchy. At the end of each phase, one should be able to define what themes
are and are not.
6. Producing the report: When the researcher has come up with a decent set of themes, he'll go on
to the sixth phase, where he'll write and report on findings. It's crucial to highlight that the story
of the themes is told accurately, consistently, logically, without repetition, and with a sense of
appeal coming from within or via the themes.
38
Table 1- - Phases of thematic analysis adapted from Braun and Clark (2006)
PHASES
DESCRIPTION OF ANALYSIS PROCESS
1
Familiarizing
myself with data
• Narrative preparation (transcribing data)
• Re-reading data and noting initial ideas.
2
Generating initial
codes
• Coding interesting features of the data in a systematic fashion across the
entire data
• Collating data relevant to each code
3
Searching for
themes
• Collating codes into potential themes
• Gathering all data relevant to each potential theme
4
Reviewing themes
• Checking if themes work in correspondence to the coded extracts.
• Checking if themes work in correspond to the entire data set
• Reviewing data to search for additional themes
• Generating a thematic map of the analysis
5
Defining and
naming themes
• On-going analysis to refine the specifics of each theme
• Generating clear definitions and names for each theme
6
Producing the
report
• Selection of vivid, compelling extract example
• Final analysis of selected extracts
• Relating the analysis back to the research question, objectives, and
previous literature review.
39
4.0 RESULTS
This chapter presents the qualitative analysis and report of the study. The respondents have been
given pseudonym names to make the report more explanatory.
Table 2- Summary of areas, themes, and sub-themes
Area
Extent of interaction
with crowdfunders and
entrepreneurs
Nature of impact
Financial interference
Threats
Strength
Themes
Sub-themes
Relationship
Active and successful
Existing trust and reliability
Activities
• Provided expertise initiatives
• Monitored decisions made and expected result
Funding
• Made profit as projected
• Achieved minimal start-up goals
Challenges
• Conflicting interest with crowdfunders on the business goal
• Pressure to meet up with business agreements
Benefits
• Access to further crowdfunders
• Business exposure
40
4.1. Extent of interaction with crowdfunders and entrepreneurs
4.1.1. RELATIONSHIP
Figure 5- Chart showing participants responses to question based on the relationship
A. Active and successful:
The respondent's general assessment of their relationship with their crowdfunders indicated a positive
result. Describing the relationship as success could mean certain factors such as favourable terms and
interest in the entrepreneurship's nature; others classify success if the funding was successful.
'I was able to receive funds, and they were frequent to get back to me and discover how far my business
has grown', Josh.
The participants also accustomed the success to its legal proceedings where it is applicable. Since
funds, trust and guarantees are involved in equity crowdfunding, it is important to the entrepreneur and
the crowdfunders that their investment and business are not lost, making legal contracts as guarantees.
As Amanda puts it,
'I find the legal proceeding quite reasonable for me'.
41
B. Existing trust and reliability:
In equity crowdfunding, the potential crowdfunders evaluate the readiness of a business to step up
when deciding on investment (Wiltbank, et al., 2009). The amount of information about the business
available determines investment decisions. As it is earlier proven, most of my respondents attest to a
certain degree of reliability and trust existing between both parties. The entrepreneur is expected to
trust the public with relevant and adequate information about their projects to the crowdfunders.
Some even require a full study of the busy project. If the crowdfunders are satisfied with the data
presented, they can, in turn, trust their investments into it. The respondents agreed to the existence of
this level of trust and reliability.
4.2. Nature of Impact
4.2.1 ACTIVITIES
Figure 6- Chart showing participants responses to question based on activities
The number of activities evident among both parties can be used to measure the level of success if
there is. When the author desired to investigate the impact crowdfunding has on businesses, the
response highlighted the activities engaged in between the entrepreneurs and their crowdfunders. A
higher percentage of the respondents, when asked 'how would they rate the strength of the current
impact Equity Crowd-funding has on your business?' rated this imparts on a minimal scalebetween 4-6.
42
A. Provided expertise initiative:
To deduce the level of investment activities, the author desired to find out if crowdfunders provided
expertise initiative or counselling to the business idea. First of all, since there are diverse projects
available, most crowdfunders do not necessarily need to have detailed business knowledge of the nature
of the project they are willing to invest in. Thus, they may be limited in ideas to push the business
forward. Also, conflicts may arise when the entrepreneur's visions are different from what the
crowdfunders may be provided. The result shows that where they are professional involvement of
crowdfunders through consultations and expert opinions, it was terminated as soon as the return of
investment was attained.
'They did not take part in the management. They just got their invested amount back after the agreed
period. Jim.
This is logical as it is with most investments. When targets are met, the contrasts are terminated, and
everyone goes home. However, contrary to Jim’s assessment, most of the respondents attest that their
crowdfunders provided initiatives from an experts’ standpoint.
B. Monitored decisions made and expected result:
In general, crowdfunders look for signs of future success possibility of the venture (Meseri&Maital,
2001). When the project invested in is designed in stages, implying that the present or previous may
determine the next level of success, it is expedient for investment platforms to monitor the process. The
author inquired about the level of this monitoring present in Sweden and discovered that most
respondents agreed to the crowdfunders' observatory eye' to ensure goals are attainable. In some cases,
updated information was expected as feedbacks.
'We have an ongoing dialogue, letters on intent and meetings to update them' John.
43
4.3. Financial interference
4.3.1 FUNDING
50%
Figure 7- Chart showing participants responses to question based on funding
The goal for both entrepreneurs and crowdfunders in equity crowdfunding is to obtain financial
investment and investment returns, respectively. Achieving these for both is hinged on the factors
highlighted above. However, the author also investigated the level of economic impact. That is, what the
financial investments achieved for the entrepreneurs. Amanda responded that:
'The financing helped us to move towards the profit'.
As it is seen on the graph, most of the participants' response when asked what the funds received were
able to achieve was that it helped make a profit as projected and achieved minimal startup goals.
44
4.4. Threats
4.4.1 CHALLENGES:
As with any other form of investment, there may be some challenges posing a threat to equity
crowdfunding success in Sweden in relation to entrepreneurs. These challenges may arise from
conflicts of interest, unmet deadlines/targets, and the extent of crowdfunders' expectations, control
rights, and regulations. The author inquired about these challenges, if they existed and what they were.
A. Conflicting interest with crowdfunders on business goal:
On control over the projects, shareholders have a right to vote and coordinate with all activities
done via the Internet (Schwartz, 2013). The author discovered that unifying targets and expectations
was challenging for both parties. Jim interprets his challenge as:
'Unrealistic Business growth expectations from crowdfunders.'
'It is sometimes difficult to coordinate and monitor large crowdfunders'(Luke).
Figure 8 - Chart showing participant's response on challenges
45
Luke's challenge, for example, agrees with Agrawal, (2013) perceptive where the entrepreneur is
exposed to a large number of crowdfunders who become shareholders by small amounts of capital.
Thus, diligence is required on the part of the entrepreneur to accord the same level of responsibility
in attending to them.
Some respondents also reported that Covid-19 has a present challenge for equity crowdfunding. Anna
pointed out that:
'The pandemic has been a measured source of setback for our business because the crowdfunders were
not so certain about the outcome'.
Another respondent, Karin, explains that:
'…due to the pandemic, it made it even harder to have a relationship with the crowdfunders on a
personal basis.
4.5. Strength
4.5.1 BENEFITS
Figure 9- Chart showing participant's response on benefits
The author further investigated the overall benefits of the relationship between both parties on present
and future advantages.
-
46
A. Access to further crowdfunders and business exposure:
'I would say I've benefited because I was able to overcome funding difficulties' Chris.
'I think equity crowdfunding provided me exposure that facilitated further investments' Dan.
'We are looking forward to having a community like a relationship with our crowdfunders and want
them to be Ambassadors' Mary.
The responses show equity crowdfunding has been impactful for entrepreneurs centring majorly on
relieving the entrepreneurs of burdens of startup funding, raising brand ambassadors from online
exposure, and the possibility of aiding further investment. The author also discovered from the
literature review that public exposure, as evident in equity crowdfunding, also exposes entrepreneurs to
the risk of idea theft (Schwienbacher, A. & Larralde, B., 2012). However, the respondents did not in
this research indicate this as a challenge but rather heightened the exposure as benefits.
4.6. Result Deductions and Summary
The author also investigated the state of wellbeing of entrepreneurs engaged in crowdfunding. The
author considered factors such as duration of the relationship with crowdfunders, level of success
obtained, and extent of benefits as indicators of wellbeing.
Figure 10- Chart showing participant's responses on how equity crowdfunding has benefited them
47
The results show that entrepreneurs in Sweden have derived a high degree of satisfaction from equity
crowdfunding. With an average of 2 years of an existing relationship, about 75% of the participants
agreed that they have benefitted from equity crowdfunding. They also expressed their wiliness for a
further and successful relationship. The analysis also showed that with the presence of challenges, the
benefits derived by the entrepreneurs outweigh the challenges. Thus, the relationship is sustained.
48
5.0 CONCLUSION
This chapter deals with the concluding findings of the research, its limitations, further research
approach and recommendation. Here the author summarizes the results obtained from the analysis with
areas of improvement.
This paper provides a qualitative analysis of the relationship between entrepreneurs and Crowdfunders
in Sweden. The study identifies the core themes and subthemes that stand out as determinants of the
relationship success between both parties. The study also analyzed how a positive impact of a successful
relationship between crowdfunders and entrepreneurs may affect the wellbeing of the entrepreneurs. The
paper describes how crowdfunding has metamorphosed over time and its current state in Sweden, and
the contributions made to business success in Sweden from the perspective of the entrepreneurs. The
qualitative analysis indicated that the recipients reported a measure of success on the themes of
financing and benefits from crowdfunding according to Macht & Weatherston, (2014). However, no so
much encouraging could be seen of the relationship between both parties and activities in line with
business goals.
Despite the fact that crowdfunding has been identified as effective for various venture stages and either
social or business entrepreneurship, the research shows that entrepreneurs usually have average
knowledge of how crowdfunding works for non-profit and profit-driven businesses. Despite the fact that
the literary analysis on the subject is highly thorough in its explanation of the problem (Kleinert,
Grunhagen & Voltmann, 2020), Crowdfunding incorporates a variety of business models. The analysis
demonstrates that young aspiring entrepreneurs are well-versed in a variety of topics. The donation and
incentive-based methods of crowdfunding are recognized, but the lending and equity models are not
(Kleinert, Grunhagen & Voltmann, 2020).
It was also clear that the entrepreneur had knowledge of the minimum expectation they expected from
the platforms that host crowdfunding and the crowdfunders. The result shows that somecrowdfunders
and platforms were less responsive to providing business expertise or showed a determined interest in
helping the entrepreneur beyond finances. This expectation may sound far-fetched from the
crowdfunders' perspective, as finances are the core basis of the relationship in the first place (Macht &
Weatherston, 2014). The respondents, however, indicated they would have loved a bond that would
show the crowdfunders do care about how their ventures would survive.
49
5.1. Discussion
This qualitative study reveals that crowdfunding can provide a unique opportunity to influence the
success of entrepreneurship according to Ahlers, et al., (2015). The research findings also agrees with
Belleflamme, et al, (2013) that crowdfunding platforms can facilitate more efficient and large-scale
interpersonal connections that stimulate entrepreneurial effort. Users, for example, say they've gained
confidence in their work where the relationship is deemed successful. It also provides the opportunity
for financial and business support from the crowd, observing or shadowing successful people, mastering
abilities such as communication of ideas, and developing the drive to achieve as a result of their
experiences.
The findings also imply that crowdfunding can impact how new entrepreneurs think about their
profession and how they build their businesses after the campaign is over Belleflamme, et al, (2013).
Currently, opportunities for new entrepreneurs to develop self-efficacy are typically competitive and
confined to a small number of entrepreneurs (Mollick, 2014). In addition, amateurs are unlikely to have
a large following to rely on for support. On the other hand, crowdfunding allows them to receive not
only money but also psychological support to carry out their work. Furthermore, it allows any
entrepreneur to submit their concept and get support from a broad audience of individuals worldwide.
Entrepreneurial wellbeing, as defined earlier in this thesis, reflects the experience of satisfaction,
positive affect, infrequent negative affect, and psychological functioning (Johan et al., 2019). Thus,
when an entrepreneur engages in crowdfunding, receives funds and apply them to progressive business
goals, it can be concluded that the welling of the entrepreneur is positive, as stated by Neve & Diener
(2013) and Carree & Verheul, (2012). The result shows that most of the respondents have received funds
through equity crowdfunding and have successfully applied it to their business to generate a successful
take-off and achieve minimum startup goals. The result also shows room for improvement in partnership
and expert advice areas.
More entrepreneurs are starting their businesses with the help of crowdfunding sites because they can
get support, mentoring, and training that they wouldn't get otherwise. As part of their course projects,
several design teachers have already begun educating students on crowdfund. Entrepreneurs from
underserved communities or with minimal contacts to angel crowdfunders or venture capitalists have the
same options as those who are surrounded by traditional funding opportunities since anyone with
50
Internet access can crowdfund. This empowering experience can strengthen a healthy relationship
between the two parties.
The findings from this research can serve as indicators of the expected average level of relationship
between crowdfunders and entrepreneurs in equity crowdfunding. There are vast components worthy of
research on equity crowdfunding which poses a limitation (Wilson & Testoni, 2014). However, this
report can help academics determine what subject sector requires further study. It can also help the
government in Sweden develop regulatory policies to protect both entrepreneurs and crowdfunders.
The outcome of this research can help entrepreneurs understand better the concept of equity-based
crowdfunding. This understanding can help them in making future decisions to participate as this
research gives them an overview of what to expect.
Crowdfunding is a strong tool that entrepreneurs utilize worldwide to start a business or launch a new
product. Crowdfunding is a useful tool to consider if an entrepreneur is considering a new product
and/or wants to experiment with real-world data and money. When they first start out, it's critical to
concentrate on growing their community. This is an essential part of the relationship (Josefy et al.,
2017). They would want a following of rabid admirers who are enthusiastic about the entrepreneur’s
goods. This necessitates the development of customer ties. Too many companies try to "blast" their
message out to the public, hoping that it will have a good impact; this is not a wise decision. Building
relationships by assisting others and demonstrating how your product or service can solve their
problems or open new opportunities is a much better method to connect, according to Chan &
Parhankangas (2017).
Another current trend in crowdfunding is to do more than only raise funds. Start-ups require assistance
in a variety of areas (Kleinert & Volkmann, 2019). Entrepreneurs frequently have skills in one field,
such as engineering, but not in others, like as design or marketing. Hiring for your areas of weakness is a
fantastic idea. Crowdfunding can assist in shepherding a nascent business through the many stages
required (Kleinert, & Volkmann, 2019).
51
5.2. Limitations
This study's research was conducted with only a few entrepreneurs in Sweden (this is due to the
inability to establish contacts with them. it is possible that the findings may not be appropriate to infer
the true state of the relationship between crowdfunders and entrepreneurs in the entire Sweden region.
As a result, because the study is exploratory, the findings should be examined in light of the specific
context in which the empirical study was conducted, limiting the potential to generalize the findings to
other countries or areas of study, necessitating additional research. Nonetheless, the findings add to the
body of information about crowdfunders, and it is hoped that this first study will serve as a foundation
and a springboard for future research.
This research focuses on the crowdfunders-entrepreneurs relationship from the perspective of the
entrepreneurs only, which the author agrees does not give the whole picture from all sides. The
crowdfunders’ perspectives could be explored in future research.
Secondly, the COVID-19 pandemic situations and diverse economic challenges have limited the number
of crowdfunding activities as crowdfunders are skeptical about investing as they can't predict the
outcome.
Another significant limitation to this research was that the pandemic restricted thecollection of direct
entrepreneurs' responses via physical interviews as it is standard with the thematic method of analysis.
This development in the course of writing this thesis resulted in the author subscribing to using a semi-
structured questionnaire instead. This method was to serve as a close alternative to the process of data
collection. This alternative method may contribute to a significant difference in the results obtained.
The choice of a qualitative research method rather than quantitative such as statistical methods, was
because of its flexibility in handling informative data. However, the author agrees that if the study was
conducted again using statistical analytic methods, the study might probably produce a different result.
52
5.3. Recommendation
Working as an entrepreneur might be intimidating. Understanding how to best help entrepreneurs using
internet technologies could significantly impact how individuals go about their jobs.
The research in several directions for encouraging the relationship between crowdfunders and
entrepreneurs can include the establishment of specific entrepreneurship courses, business seminars that
should reduce the hurdles connected to difficulties in effectively implementing funds received from
crowdfunding on ventures. Ad hoc courses aimed at particular competencies needed by less qualified
potential entrepreneurs should also be developed in order to broaden knowledge in management, digital
marketing, and finance. This will further boost the confidence of the entrepreneurs.
5.4. Further research
There is still a need for in-depth research on equity crowdfunding in Sweden and its development in the
future. Further research may conduct within a similar framework of this research but with a different
method of analysis. Crowdfunding in Sweden is rapidly changing with new platforms being launched. It
is important to study if the same level of relationship success can be achieved on all platforms as the
platform's policies may influence successes.
Further research can also investigate exits from crowdfunding. Investigating what happens when the
relationship between entrepreneurs and crowdfunders is terminated and what type would be considered
dominant.
53
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62
APPENDICES
63
QUESTIONNAIRE:
THE RELATIONSHIP BETWEEN ENTREPRENEURS WELL BEING AND CROWDFUNDERS IN
EQUITY CROWDFUNDING
The aim of this survey is to understand entrepreneurs' well-being and their relationship with their
crowdfunders after successfully involving in equity crowdfunding. This will help the author to provide
an overall analysis of entrepreneurs' well-being and also provide possible suggestions and solutions.
Hence answering the survey question will be of great benefit to improve the author’s learning and also
serve as a relevant document for future purposes.
Q1. How long has your business relationship with your crowdfunder(s) lasted?
_______________________________________
Q2. How would you describe the relationship existing between you and your crowdfunder(s)?
• Active and successful
• Existing trust and reliability
• Professional and consultation
• Existing but inactive
• Non-existent
• Other: _______________________________________
Q3. How would you describe your crowdfunders’ involvement in the development of your business? *
• Helpful at first but declined
• Provided business consultations only
• Monitored decisions made and expected result
• Provided expertise initiatives
• No shown interest what-so-ever
• Other: _______________________________________
Q4. What did the funds received from equity crowd funding help your business accomplish?
• Made profit as projected
• Achieved minimal start-up goals
• Just a successful take-off
64
• Made no significant progress thereby incurring losses
• Other: _______________________________________
Q5. What was the challenge(s) you experienced using Equity Crowd-funding? *
• Conflicting interest with crowdfunders on business goals
• Unrealistic Business growth expectations from crowdfunders
• Heavy demands of returns of investment
• Pressure to meet up with business agreements
• Other: _______________________________________
Q6. Would you agree that Equity Crowd-funding has benefited you?
• Absolutely
• In a way but not as I expected
• Disappointing
• Other: _______________________________________
Q7. What future benefit(s) has Equity Crowd-funding generated for you?
• Access to further crowdfunders/investments
• Product/service promotion
• Achieving successful start-up growth
• Financial autonomy
• Business exposures
• Other: _______________________________________
Q8. How would you rate the strength of the current impact Equity Crowd-funding has on your
business?
• Strong and effective (7-10)
• Minimal (4-6)
• Weak and dissociated (1-3)
Q9. Does your crowdfunders currently play a certain role or occupy key positions to develop your
business?
65
• Yes, as agreed upon by both parties
• No, based on challenges
• To an extent
• Other: _______________________________________
Q10. Has the relationship with your crowdfunder influenced your business goals, ideas or strategies in
anyway?
• Yes, but positively
• Yes, but negatively
• Yes, because i had to adjust to retain their investment
• No, which has affected my negatively
• No, which makes it convenient for me
• Other: _______________________________________
Q11. Will you like to maintain the relationship you currently have with your crowdfunder(s)? *
• Yes
• No
• Maybe
• Other:_______________________________________
Q12. I have other things to tell you
Link to questionnaire and result
https://docs.google.com/forms/d/e/1FAIpQLScoYEM_MOAseEXaMXM3gbw1QWOPFtI8LOX8-
XYGDYYAk9OycA/viewform?usp=sf_link
https://docs.google.com/forms/d/1H77iUciOKZ6ZQfjVbUO3yvB4d5Csvt4ye7i5_BUyXSs/edit?usp=sh
aring
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