Deep pockets : Exploring the investment decisional process of the crowdinvestor

The digitisation of the economy offered a new context for entrepreneurship to act as a catalyst of change. For example, platforms offered new opportunities for people to co-create value by means of online crowdsourcing. One form of such is equity crowdfunding, where, in pledging to entrepreneurial projects promoted via online marketplaces, people have had the opportunity to support entrepreneurs. However, the presence of massive information asymmetries in such a digital environment has exacerbated adverse selection issues; crowdinvestors find it difficult to evaluate the quality of the promoted projects. The risk they face is finding themselves trapped in failures that would prevent future investments. In turn, this would negatively affect the network effects needed for the industry to survive and thrive. Whilst the research community has fostered the need for increasing transparency in the industry, there is a paucity of research on the challenges the crowd must face when making an investing decision. This would help to develop a better comprehension of their behaviour and in turn a better understanding of to what extent platforms and entrepreneurs could contribute to creating a more transparent and safer investing environment. With this in mind, the present study aims to provide an understanding of how crowdinvestors make investment decisions and what needs they try to address when making an investment decision. By leveraging a framework analysis method, data from 15 crowdinvestors based in the EU and US were analysed. The findings indicate the presence of a bounded-rationality approach through which crowdinvestors combine rational and irrational elements to make investment decisions, thus opening a new perspective to explore the behaviour of crowdinvestors in the context of equity crowdfunding. Moreover, the findings also highlighted that, in making investing decisions, crowdinvestors try to address self-determination needs. In contributing to the investor perspective stream of research in equity crowdfunding research, the present study also offers practical insights for entrepreneurs, platforms, and the policy maker.