An evaluation of the risks faced by rewards-based crowdfunders to improve their role in entrepreneurial funding

Abstract

The thesis examines the Rewards-based Crowdfunding model (RBCFM), in order to improve its effectiveness in bridging the entrepreneurial funding gap from a 'risk perspective'; with an exploration of the impact of the sector on crowdfunder investment decisions. The gaps in the literature in this relatively new area of study, uncovered that although there was some research regarding the motivation of backers and project success, very little had been done in the area of risk - from the viewpoint of the crowd.A pragmatic epistemological stance was adopted, using a mixed method approach, which drew the scientific (risks inherent in the process), normative (risk/reward relationship), psychological (risk perception and attitude to risk) and socio-cultural (participation on social media platforms) theories of risk together, with an attempt to create an appropriate fit for the model. A triangulation parallel convergence model was employed. The quantitative segment of the study was carried out through an analysis of 207 questionnaire results via SPSS, in order to conduct a series of multiple regression analysis alongside a Principal Component Analysis (PCA) of the results. For the qualitative segment, 15 semi-structured interviews were conducted and analysed using a thematic analysis, facilitated by the Nvivo software.The results of both aspects of the data analysis suggest that the investment decisions of Rewards-based Crowdfunders (RBCs) are affected by their perception of a project's risk, with the risk of not receiving the rewards being the origin point in which all other themes emerge. Both segments of the research seemed to agree that the sector played a somewhat limited role in their investment decisions. RBCs were discovered to firmly stick to their sector/s of interest, because of their interest in the specific rewards. However, the qualitative analysis went on to uncover that crowdfunders do recognise that sectors have inherent sectorial risks – although their ability to correctly assess the level of this risk was highly variable. Furthermore, none of the RBCs interviewed in the study diversified on the Rewards Based Crowdfunding Platforms, as they had tendency to back projects of interest.Elements of crowdfunder's risk perception and risk/reward stimulus are related to their attitude to risk, and the inherent risks present within each sector. This concept is presented within the NADA pragmatic risk framework provided. This framework should encourage RBCs who perhaps may be interested in backing other sectors but hold themselves back due to an incorrect risk perception. Furthermore, it may also prove useful for potential and present entrepreneurs and backers, in helping them to better understand the dynamics of risk taking – in order to improve their risk perception and help improve the entrepreneurial funding gap.

Date of Award	Dec 2022
Original language	English
Awarding Institution	University of Bedfordshire
Supervisor	Alexander Kofinas (Supervisor), Carmel McGowan (Second supervisor) & Golda Komanapalli (Third supervisor)