Journal Article

Expand innovation finance via crowdfunding

Sorenson, Olav, Boada, Jason, Li, Guan-Cheng, Assenova, Valentina, Fleming, Lee

2016

Overview

Crowdfunding attracts venture capital to new regions Crowdfunding (CF) platforms, such as Kickstarter (KS), offer a means of funding innovation, connecting inventors and entrepreneurs with a multitude of supporters, who each provide a small fraction of the amount required to fund the project. Although considerable funding for innovation has historically come from venture capitalists (VCs), the entrepreneurs funded by VCs often mirror the investors in terms of their educational, social, and professional characteristics and end up concentrated in a small number of regions ( 1 – 4 ). Policy-makers have thus hailed CF platforms, hoping that they will expand access to entrepreneurial finance, including among women and minority innovators, and that the innovations funded will create jobs and spur economic growth ( 5 ). But if particular regions, or certain sorts of individuals, routinely produce better ideas ( 6 ), and VC concentrates on them, then CF might simply compete with professional investors to fund the same ideas. We find, however, that CF has been funding innovators in a large number of places that have typically been excluded from VC, and has also been expanding the geographic reach of VC itself.

• Publisher: American Association for the Advancement of Science,The American Association for the Advancement of Science
• Subject: Concentrates / Crowdfunding / Economic growth / Entrepreneurs / Entrepreneurship / Finance / Funding / Innovation / Innovations / Inventors / Investment / Platforms / POLICY FORUM