Crowdinvesting as a financing instrument for startups in Germany. A critical platform analysis

In the working paper we examine crowdinvesting as a new way to finance new ventures, which helps to close the early stage equity gap. This way of financing start-ups leaves us some questions: Is crowdinvesting able to finance new ventures in a sustainable way? Which risks and chances come along with it? Is the method able to establish itself as a basic instrument among others in the financing canon? We answer these questions by analyzing the different forms existing in Germany. To defi ne crowdinvesting we first explain the antecedents of it - crowdsourcing and crowdfunding. Then, we present the central crowdinvesting platforms in Germany. Afterwards we discuss the use of crowdinvestment in the venture financing process and compare crowdinves ting with related financing methods. The paper closes with two discussions important for future research: first, the role of motivation and herding behavior and second, the role of trust with regard to the principal-agent problem. Equity-based crowdfunding is a relatively new method to obtain capital for start-ups. Hereby ventures use special Internet platforms to issue shares of different sorts to the public. However, a great variety of platforms exist, which leads us to the question of whether there is a general crowdfunding process enabling founders to finance their business or not. If we knew of a general model, we could give recommendations to founders, service providers and investors. Therefore, in this article, we analyse the process of equity-based crowdfunding from the perspective of a capital seeker and ask how the process of equity-based crowdfunding is structured in practice. We answer this question by conducting an explorative analysis consisting of an iterative examination of the 16 different platforms existing in Germany. By doing so, we aim to identify commonalities and differences and derive a general model. The findings will be used for further discussion and provide information for stakeholders in order to optimize the process