IfM study on company start-ups and crowd investing

A contribution from muenchen.ihk.de

Bringing the crowd on board as an investor is becoming increasingly important for founders and startups in Germany. Besides money, other aspects also play a key role. This is at least the result of a recent study by the Bonn Institute for Small and Medium-Sized Business Research (IfM) on company start-ups and crowd investing.

The researchers examined, among other things, the reasons why young companies choose crowdfunding, but also the position this new financing method occupies in startup financing and how successful the financed startups are in the market. We interviewed Jonas Löher from IfM Bonn about the results of the study.

Mr. Löher, who or what did you specifically examine in your study? What data are the findings based on?

Jonas Löher: The aim of our study was to identify initial trends and developments in crowdinvesting in Germany. To this end, we analyzed 163 financing rounds initiated on Germany's largest crowdinvesting portals between 2011 and 2014. In addition, we surveyed 45 crowdfunded companies and interviewed numerous experts and platform operators.

Crowdinvesting: 85 percent would do it again

Before a crowdfunding campaign can be successful, founders often face enormous effort. From the initial pitch for the platform to the actual execution of the campaign. If money plays only a secondary role, why is crowdfunding becoming increasingly popular in the startup scene?

Jonas Löher: The search for investors is a constant challenge for many young, growth-oriented companies, and it already involves considerable effort. Crowdinvesting also requires companies to engage in a number of targeted activities. Platforms have a rigorous selection process, ultimately allowing only a very small percentage of companies seeking capital onto the platform.

In terms of motives, securing capital inflow played a key role for the companies we surveyed. Speed of financing was also cited as a key motive. However, non-monetary added value such as advertising to end customers and access to networks were also of great importance. Furthermore, the companies seeking capital appear to have a realistic idea in advance of the added value that crowdinvesting actually offers them. This is one of the reasons why 85 percent of the entrepreneurs we surveyed stated that they would choose crowdinvesting again.

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