New research reveals the factors that motivate crowdfunders to invest
Two thirds of funders are more likely to invest in a concept they are ‘personally moved by’, Crowdcube study suggests
New research uncovers the key factors that encourage people to offer up investment through crowdfunding platforms.
In a study of 89 investors led by crowdfunding platform Crowdcube, respondents highlighted ‘perceived market potential’ and ‘prior experience of the entrepreneur’ as the crucial factors that determine whether or not they choose to invest.
The research, which was carried out in partnership with Julia Levitt, an MSc post-graduate from the London School of Economics also uncovered that being ‘personally moved by an idea’ was a significant reason for investing, with two thirds of participants noting this as a key motivating factor.
Other significant reasons for investing included the desire to support British businesses and the ability to offer the chance of success to people beyond the very wealthy.
With an average pledge between £1,000 and £4,999, the crowdfunders also showed awareness of the risks involved and many claimed to invest only as much as they were willing to lose, while others revealed that they thoroughly researched the entrepreneurs before handing over their cash. Luke Lang, co-founder of Crowdcube commented: “It is encouraging that the findings highlighted a high level of risk awareness and sophistication among investors; debunking the view that investing should be the preserve of the wealthy or experienced angel investors.
“The new breed of ‘armchair dragons’ say that crowdfunding gives them a meaningful way to make an impact on finance starved start-ups.”