Crowdfunding is a new phenomenon which gives people (the crowd) the opportunity to fund a project or a business idea they share an interest in using online platforms. Crowdfunding can take several forms and the aim of the book is deepening the understanding of a specific category of crowdfunding, namely financial return crowdfunding, which includes both peer-to-peer (P2P) lending and equity crowdfunding and that reveals itself as an extant, interesting and challenging topic. The theory to which financial return crowdfunding is most closely related is that of asymmetric information, which helps explain the existence of financial institutions because they reduce market imperfections (market failures), consequently avoiding defaults and enabling the transfer of money within the financial system, which is of critical importance to economic development and growth. The theory of asymmetric information also relates to another topic dealt with in the book, that of the financing gap faced by small and medium-sized enterprises (SMEs).
We believe that financial return crowdfunding may play an important role in backing firms and projects that would not be funded or only partially financed in traditional ways, that is, through the banking channel or financial markets, particularly in the case of SMEs. This book thus investigates whether financial return crowdfunding is capable of either reducing the funding gap of SMEs and becoming an alternative or a complementary funding channel to traditional sources of capital for those firms. In this context, policymakers play an important role by introducing adequate rules to favour financing for SMEs on one hand and protect investors on the other. Crowdfunding was born in the US and differs from the European approach in many aspects, the most evident being the advance in regulation on the part of the US. It is recognised that crowdfunding, and financial return crowdfunding in particular, should be a regulated activity because of the potential risks it carries. Focusing on the European level, regulation should be homogeneous across all European countries, to avoid regulatory arbitrage and differences in investor protection across countries. Because of the variety of business models, and the novelty of crowdfunding, it is indeed not clear which EU legislation is applicable, or potentially applicable, and how it should be applied.
Given these premises, it is clear that the analysis must involve experts in different disciplines, specifically management, finance and law, to deal with the main aspects related to crowdfunding.
The first two chapters form a basis for the analysis of financial return crowdfunding. Chap. 2 by Flavio Pichler and Ilaria Tezza introduces, defines and conceptualises the phenomenon that is named âcrowdfunding.â It also presents a classification of the types of crowdfunding and explores their main features. Further, it investigates the academic literature on crowdfunding that, although rapidly growing, is still in its infancy, to explore the streams of research on this particular funding model and the methodology that is typically used to assess the phenomenon. Chap. 3 by Federico Brunetti depicts the role played by the Web 2.0 technology in fostering the development of crowdfunding. The general features of Web 2.0 as a communication and interaction environment, both at an individual and a collective level, along with the features that are most relevant to crowdfunding will be considered.
The next two chapters concern P2P lending, which is one of the two categories that make up financial return crowdfunding. Chap. 4 by Roberto Bottiglia highlights the competitive frontiers of crowdfunding in terms of both potential clients and likely competitors. The former consists mainly of SMEs and other public and/or private entities performing an economic activity; the latter relates to retail banks and other non-bank financial institutions that provide firms with funding. It is also important to determine which factors foster the success of P2P lending crowdfunding the most.
Chap. 5 by Giuliana Borello investigates the business model of a sample of European P2P lending platforms. The analysis aims at identifying the specific characteristics of this form of crowdfunding that enables it to become an alternative or complementary source of capital for SMEs.
The two chapters that follow deal with the other category of financial return crowdfunding, that of equity crowdfunding. Chap. 6 is by Vincenzo Capizzi and Emanuele Maria Carluccio explores the role of seed financing from venture capital and private equity as equity crowdfunding becomes more important. Platforms will indeed have to cope with collective-action problems, since crowd-investors have neither the ability nor the incentive to devote substantial resources to the sort of due diligence undertaken by venture capital and private equity funds. Chap. 7 by Veronica De Crescenzo takes on the business models of equity crowdfunding platforms with a twofold objective. It first aims at identifying the main features of platforms, target companies and investors. Second, it attempts to point out the key success factors of funding rounds posted on a sample of European equity crowdfunding platforms.
Finally, given the risks that pledgers/investors to a crowdfunding campaign face, the role of regulation should be considered. Chap. 8 by Paolo Butturini gives an insight into the regulation of crowdfunding in Europe, both at a domestic and a supranational level. Indeed, some European countries have already set up specific rules relating to financial return crowdfunding; however, the definition and implementation of a set of agreed, common rules at the European level are still in their infancy.
