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Crowd Funding For A High Risk Fast Growth Business

2561 words - 11 pages

Introduction
New technological advancement has led to the emergence of many innovations in the field of business. Most often, individuals or groups coming up with these ideas and innovations do not have enough funding of their projects and businesses. Such situations drive them to search for better lending and funding bodies to accomplish the set objectives. They may acquire funding through bank loans, family members, partnership, business, venture capital firms and grants and other funding bodies. Most start-up businesses may face financial crisis or may desire to expand to meet their consumer demands that require funding to continue with their operations and expansion. This research seeks to whether enterprises, specifically start-up businesses, can rely on crowd-funding as a substitute for venture capital firms.
Crowd funding is where individuals form a network that raises the expected amount to learn a business in a business enterprise. This type of funding is common in funding projects such as disaster management and control, funding political campaigns, scientific research and supporting the art industry. The theories applied in such projects may be used in a business environment where the equity is sold to many investors. These individual investors benefit through payment of dividends as shareholders of the project. This research paper will evaluate on whether individuals can be willing to invest their finances in a start-up business to earn a share of a business equity.
1.1 Hypotheses
The author hypothesizes that crowd funding would be a viable alternative source of capital if the general public has the ability to raise enough money and they are willing to give it to entrepreneurs who are starting businesses in exchange for a share of private equity in the businesses. This study will also focus on the sustainability of the idea of selling private equity to the public through crowd funding activities. In this regard the researcher hypothesizes that, crowd funding as a source of venture capital would be sustainable if the members of the general public, in this case the investors, would remain willing to continue investing. To evaluate the sustainability, the researcher will focus on the factors that affect investor willingness to continue investing in private equity.
1.2 Stating the Problem
Through the emergence of new business ideas due to advancement in technology, many who bears great ideas lack the capital to put their ideas into a real business enterprise. Therefore, the need for sourcing capital remains a challenge to many innovators. Their business ideas being a start-up are classified as high risk fast growing businesses. For this reason, many lenders prefer existing business rather than start-up. This paper explores on whether it can be used as a sourcing channel for the innovators. The paper will evaluate on how entrepreneurs who forsake their ideas due to lack of funds may be considered. Some of them come up with high income...

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