Alternative Digital Methods of Providing Entrepreneurial Finance

Hadar Gafni

Research output: Book/ReportPhD thesis

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Obtaining finance for their ventures is a challenge that most entrepreneurs face. The demand for funding from venture capital funds, angel investors, and banks is never met in full, leaving countless of innovative ideas unrealized, promising business opportunities missed, and dreams shattered. Certain groups among the population of entrepreneurs find it even more difficult to realize their business ideas: women and microentrepreneurs in developing countries. They might be discriminated against, or simply be left out of the playing field, without any means to borrow or even save money.
Solutions might come in the form of nascent digital technologies: crowdfunding and mobile money services. The purpose of this dissertation is to enrich our understanding of these innovations, and to find out if and how they can support female entrepreneurs and microentrepreneurs in securing the finance they need and establishing their own businesses.
I start by researching crowdfunding, which has been known as an instrument to democratize the entrepreneurial finance process, taking the funding decisions from the few to the many. The first chapter investigates the pitching process in a reward-based crowdfunding setting and asks what is more important for the backers who fund the projects – the project they are asked to fund, or maybe the entrepreneur behind it? The results are in favor of the latter, as they highlight the importance of the representation of the entrepreneur herself over her idea, especially when the ventures are art-related.
The second chapter remains in the reward-based crowdfunding realm, analyzing its gender dynamics from both supply and demand sides, and pointing out differences and similarities to traditional methods of finance. The results show higher participation rates of women as entrepreneurs and as backers in the investigated platform than in the traditional finance markets, as well as higher chances of funding success for women than men. Backers on the platform prefer to support entrepreneurs of their own gender, but with experience, women lose this tendency, unlike men, who maintain a taste-based discrimination against women.
The third chapter turns to another type of crowdfunding – prosocial crowdlending for micro-entrepreneurs in developing countries. The main question asks which type of borrower lenders would choose to lend money to – those who ask for loans to support their income-generating activities, or those who take loans to cover basic necessities? The results show that loans taken out to meet basic needs are funded faster than business-related loans, especially for small amounts, which can be explained by the prosocial motivation of microlenders. Moreover, female microborrowers are funded faster than men, especially for basic needs loans.
I complete the thesis by investigating the effects of providing financial services to men and women from developing countries on their ability to start their own businesses. The key insight is that the different genders need different financial instruments for their entrepreneurial needs – men are more likely to have their own business if they have financial accounts at banks, while mobile money accounts foster entrepreneurship among women.
Beyond the academic significance of these studies in understanding the theories and the mechanisms behind these financial instruments, I believe that the results of this thesis also have practical implications for entrepreneurs, crowdfunding platform managers, and governments.
Original languageEnglish
Place of PublicationFrederiksberg
PublisherCopenhagen Business School [Phd]
Number of pages161
ISBN (Print)9788793956643
ISBN (Electronic)9788793956650
Publication statusPublished - 2020
SeriesPhD Series

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