An Interdisciplinary Review of Investor Decision-Making in Crowdfunding

Crowdfunding is a quickly expanding phenomenon that emerged as an alternative way to finance ventures or individuals about a decade ago. In crowdfunding, individuals or ventures use online platforms to collect funds from a relatively large group of investors [1]. Today, it provides increasing competition for traditional financing agents such as venture capitalists (VCs), business angels (BAs), and banks on the one hand [2]. On the other hand, it offers new opportunities to individuals and entrepreneurs in need for financing [3]. The global funding volume was over $34 bn. in 2015 with a growth of more than 1,000% in 3 years according to a recent industry study [4]. Low entry barriers stimulate this growth: in contrast to highly regulated traditional financing markets, investing money through digital channels on crowdfunding platforms is open to almost anyone with an internet connection [3]. But when amateurs become investors, a lack of education and experience in financial decision-making can turn into an expensive endeavor, especially as human decisions frequently seem irrational by economic standards [5, 6]. How investors make decision in traditional startup financing or bank loans is well researched. For crowdfunding, however, prior research covers many individual factors of investment decisions, but does not provide an integrated view on those factors. A better understanding of how investment decisions are made in crowdfunding settings will help crowdfunding concepts and platforms evolve. It can also support investors to make better investment decisions and avoid potentially costly choices. Furthermore, better understanding decision-making in crowdfunding can provide insights into how information systems change the way financial decisions are made. Therefore the research question we address is: Which factors influence investor decision-making in crowdfunding?