Entrepreneurs Signalling to Promote Equity Crowdfunding

What is it about?

Design/Methodology/approach: the research strategy is based on three methodological approaches: desk research on online sources, a map of the crowdfunding phenomenon, and a quantitative approach with a survey performed between June and December 2020. The survey covers a sample of 147 SMEs and start-ups, in addition to semi-structured interviews with 10 entrepreneurs. Purpose: this paper aims at shedding light on the entrepreneurs’ perception towards crowdfunding as a new mean for raising capital, and their willingness to send appropriate signals to the potential fund providers/backers. Findings: the study reveals that between losing their work and losing part of their firms’ equity, entrepreneurs are keen on sending positive signals to (backers) financiers. Moreover, entrepreneurs adopt new way of thinking, as their primary goal is to save their firms, their jobs, and their source of income. The research highlights the concern of entrepreneurs of losing reputation, losing intellectual property, losing control, and of becoming only shareholders in their enterprises. Practical and social implications: overcoming funding challenges can reduce brain drain, promote a culture of entrepreneurship, serve the economy, combat poverty, achieve more equitable society, increase the levels of expectations, and turn the flywheel. Originality and value: in light of the serious financial disintermediation and liquidity shortage Lebanon faces, the findings of this study show how important changing entrepreneurial culture and behaviour is, and the crucial role crowdfunding could play in providing funds for the SMEs that form 95% of the total business sector in Lebanon. Keywords: Start-ups; SMEs; Crowdfunding; the Signalling Theory; Entrepreneurial Behaviour; Entrepreneurship.

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