Capital Formation and Crowdfunding

Abstract

Each company, large or small, starts with a dream and an idea for a new product or service. Companies can succeed or fail for a wide variety of reasons, including inexperienced managers, failure to build or sell the desired product, launching products into highly competitive environments, and a lack of capital. This chapter reviews the traditional methods of capital formation, including funding by angel investors and venture capital firms. These funding methods are only available to relatively large firms, leaving millions of small firms without reliable debt and equity funding sources to scale their business. The growth of the internet, blockchain technology, and fintech firms has introduced innovative funding methods, such as crowdfunding and Initial Coin Offerings (ICOs). While these structures have been successful in raising capital for smaller firms, changes in the regulatory environment, such as the JOBS Act, are needed for these new forms of capital formation to reach their full potential.

Citation

Black, K. (2024), "Capital Formation and Crowdfunding", Baker, H.K., Filbeck, G. and Black, K. (Ed.) The Emerald Handbook of Fintech, Emerald Publishing Limited, Leeds, pp. 177-188. https://doi.org/10.1108/978-1-83753-608-520241016