This chapter presents the findings of the interviews and provides an overview of the responses given. There is a distinction between the two groups (men and women) to identify the similarities and differences between the two groups. This is done for each proposition. The six propositions in this research are presented below in Table 1 with the degree of support. In the subsequent paragraphs, they are described in greater detail.
P no. Proposition Degree of support
P1 Male investors have more prior experience with investing than female investors.
Poorly supported P2 Male investors take more risk in investing in crowdfunding in
comparison with women.
Partly supported P3 Male investors are rational (using the cognitive part of the
brain) whereas female investors are emotional (using the affective part of the brain) when they invest.
Partly supported
P4 When there is a social campaign (based on social sensitivity and emotions), women look less at the risk component.
Poorly supported P5 Herding behaviour is stronger among female investors than
among male investors.
No support P6 Male investors care less via which platform they invest in than
female investors do.
Poorly supported
Table 1. Degree of Support per Proposition
Degree of support Percentage of respondents Iconic
Strong support > 75% ++
Supported >50% - <=75% +
Partly supported >25% - <=50% +/- Poorly supported >0% - <= 25% -
No support 0% --
Table 2. Legend of Table 1
6.1 Experience in Investing Prior to Crowdfunding
Most of the respondents had investment experience previous to crowdfunding investments, aside from two female investors who did not have any experience at all. The experience prior to investing in crowdfunding differs in the fact that male investors invested in more products
34 and generally made riskier investments. Three male investors stated that the first investments they made were in products such as turbos, options, exchange-traded funds (ETF), or futures.
These are generally seen as risky investments. All of them said they lost money in these products and are now investing in less risky investments. None of the female investors reported having made any risky investments.
‘I invest in shares, turbos, options, and ETFs. Actually, I have had all of the most common products. But I stopped with most of them, as I have noticed that when you are young and naïve you want to take more risk. But in the end that is definitely going wrong’ (R male 6).
‘I have an investment portfolio with four stocks but more the regular and reliable ones like Shell, Heineken, and Ahold. These are more the established companies and therefore to me not very exciting’ (R female 2).
‘I have zero experience; I have never invested before’ (R female 1).
Three of the interviewees (two men and one woman) reported that they trust a third party to invest their money (i.e., a fund manager who controls the fund). The investors can choose a sector, and the fund manager buys and sells the funds.
‘I try to avoid having too much money in a savings account. Most of the investments are in a fund, which is managed by a fund manager’ (R male 2).
‘I have an account with the bank, but I actually left it there and got advice of the asset manager. So I do not have to pay a lot attention to it’ (R female 4).
There is poor support for Proposition 1, but there is a gender-based difference in investment strategy. The first investments of male investors are generally riskier with turbos, ETFs and options, whereas female investors invest via a fund manager or in more reliable and stable stocks. Three male respondents stated that they lost money with their risky investments and looked for a safer investment opportunity. At the beginning of crowdfunding in 2009, most investors were male. This is still the case where Collin Crowdfund and CrowdAboutNow have approximately 80% male investors and OnePlanetcrowd, which is focussed on social
35 entrepreneurs, approximately 60%. Most entrepreneurs are also male. This differs per platform, but on average the divide is 80% male and 20% female based on the answers of the respondents.
This is in line with the findings of Hervé et al. (2016) and Huang and Kisgen (2013) who found that the investor field is dominated by men and that male investors start at a younger age. This is also in line with the findings of Mohammadi and Shafi (2018) who concluded that women opt for less risky investments.
6.2 Risk Appetite
Taking the risk component into account, there is a difference between male and female responses. This can be mainly seen in which sector they invest, where start-ups and IT companies are characterised as riskier investments than companies with a track record or companies in real estate. Of the eight male investors, five said that they also invest in start-ups, and of the seven female investors, one invested in start-ups.
‘I also look at the collateral that is given by the entrepreneurs, so I want to make sure that I will get my money back in case of a bankruptcy. One way or the other’ (R male 1).
‘The companies I invest in are often start-ups, in fact all of them. [… ] For me it is important that the product is very clear and that I understand what they are doing. An IT campaign is not something I would invest in, for me these types of companies are harder to understand and therefore too risky. [… ] another important aspect of investing is that you should spread your risk, not only in different campaigns but also via several platforms’ (R male 4).
‘Taking the risk component into account, I mainly look at the external risk score (Dun
& Bradstreet) that the platforms gives; this gives me some comfort. I have a preference for start-ups as you can use your imagination to where the company might end [… ] I mainly look at higher returns, which automatically have more risk’ (R male 5).
‘In the beginning I invested in more tech-oriented campaigns, but I changed my strategy because in my opinion those are too risky for loan-based crowdfunding. These are better suited for equity investments’ (R male 6).
‘I would not invest in start-up companies; they are too risky. [… ] Another important aspect concerning risk is how many other investors already invested and how fast the campaign goes’ (R female 4).
36
‘I am looking for low risk investment, Collin provides an external credit score (Dun &
Bradstreet) and only if this is acceptable for me I’ll consider investing. Therefore, I would not say I fully trust on the platform, because I also take external validity measures into account’
(R female 5).
‘Based on the experience of the entrepreneur(s) and the company, I make a judgement whether the risk is acceptable for me. The narrative has to be very clear to me and I have to understand what they are doing. I would not invest in start-ups’ (R female 2).
Male investors take more risk in investing. The answers given in the first proposition show that male investors invest in more risky investments (e.g., futures, options and turbos). As Hervé et al. (2016) argued, investments in start-up companies are high risk investments, and five of the male respondents invested in start-ups versus one female.
Grubel (1968) and Solnik (1974) argued that an investor should diversify their portfolio in order to have a better spread of risk. Six male investors versus three female investors explicitly diversified their portfolio via investments in several industries rather than over different platforms. This could be because the research participants invested via well-known platforms.
Sorenson and Stuart (2001) claimed that the distance between the crowdfunder and the company is key due to the importance of reputation and trust. The results do not show a difference in gender; three male and four female investors took distance into consideration.
6.3 Rational vs Emotional
All of the respondents felt that the entrepreneurs and their story are the most important aspect of crowdfunding campaigns (i.e., the previous experience of the entrepreneur, as well as the marketing story of the product or service). However, there are differences. Six of the eight male respondents took the financials and the collateral of the company into account, versus two and four of the female respondents, respectively. Additionally, women look more to the type of product and the marketing of the campaign (six of the seven female respondents versus four male investors).
37
‘For me the annual figures are very important, in particular the previous years. These should be good enough so it gives me trust [… ] I take the collateral into account when I make my investment decision’ (R male 1).
‘For me it is important that the company is a social enterprise, I would not easily invest in a normal business through crowdfunding. [… ] Until now I invested in companies that are within close range to my house, this is more an emotional thing, I can see the staff working every day. This plays an important role for my investment decisions’ (R male 2).
‘On the website they provide a lot of information and also some figures, mostly general information. I base my opinion more on the presentation, the business model, do I understand what the company is doing, and the entrepreneur’ (R male 5).
‘My savings account has an interest rate of close to zero, therefore I looked at different opportunities to invest. Because banks do not or cannot provide loans to small and medium sized entrepreneurs companies because of the crisis in 2008 and the rules they have to obey to.
These companies are in my opinion financeable’ (R male 7).
‘To be honest, the most important factor for me is whether I like what the company is doing. So I can tell my friends about the company I helped’ (R female 1).
‘I started investing via a crowdfunding platform because of my interest in the phenomenon. It is a nice way for entrepreneurs to collect funds and for me to keep up to date with the latest trends and innovations’ (R female 2).
‘I invested in projects because I like what they are doing, rather than the return. For example a tech or a biomedical company with a sustainable and proven business model and therefore a good investment opportunity would not be something for me to invest in’ (R female 4).
‘The reason of investing in crowdfunding is twofold; one because money on the savings account is close to zero and second because I like the projects [… ] the companies I invested in are within 30 kilometres from my house, so I can go visit them’ (R female 6).
All respondents invested with their spare money that would otherwise be in a savings account.
Because the interest rates are low, investors were willing to invest their money via crowdfunding. Ten of the 15 investors invested a small amount on average (< 1,000 euro) per campaign. When investors made a larger investment (> 1,000 euro), they conducted a more thorough analysis and some even visited the company and met the entrepreneurs. On average, the height of the investment is equally distributed among male and female investors.
‘ When the investments are small, let’s say below the 1,000 euro, I would really look at the entrepreneur and their story on the website. If the investments are bigger (> 1,000 euro), I would like to see more figures to get a better feeling’ (R Male 3).
38
‘Normally I invest smaller amounts of around 250 euro, but I also did some investments of 5,000 euro. I only make these larger investments when I met with the entrepreneur, to get a good feeling with this person and about their ideas’ (R male 4).
There is partial support for Proposition 3; male investors can be seen as more rational than female investors. When the invested amount rose above a certain threshold, in this case 1,000 euro, the investors wanted to know more about the company. This varied from doing thorough research on the entrepreneurs to arranging a meeting with the entrepreneurs.
The findings are in line with those of Gorbatai and Nelson (2015) and Adenzato et al. (2017) who argued that women make investment decisions based upon emotions. The importance of the communication style that Phillip and Suri (2004) found was not supported by this proposition, as both male and female investors mentioned the importance of the entrepreneur’s narrative. The entrepreneur should have a strong marketing plan for the campaign to convince the investors. All men and women felt this to be the most important part of the campaign.
Six women argued that the likability of the campaign is also important, versus four men. Men care more about to the financial aspect. Six men argued that they base their decision on the financials, versus two women. This is in line with the findings of Sellappan, Jamuna, and Kavitha (2013) who found that women make their decisions based on safety, trust, and liquidity, whereas men mainly look at profitability.
6.4 Influence of Social Campaign on Risk
The influence of a social campaign was measured in two ways. One is if the investor looks less at the risk component when there is a social campaign and secondly if they are willing to take less return when there is a social campaign. Of all the respondents, nine mentioned the importance of a social component in the campaign, four men and five women. Six men and five women would accept a lower return when there is a social campaign. There is a bigger
39 difference in the risk component, where three men and five women would look less at the risk component. Three men and one woman stated that they would rather donate the money when there is a social component. They see crowdfunding as an investment and want a return on their investments.
‘ When there is a social campaign I would not look less at the risk component [… ] I am willing to get less return when there is a social campaign; this can go up to 2% of the original return’ (R male 1).
‘ When I invest I want to have a return; it doesn’t matter if it is a social campaign or not. In that case I would rather donate the money’ (R male 3).
‘For me it is not the main argument that there is a social aspect. I think in these times every entrepreneur has this covered in their business model in order to be sustainable. If the business case is social I would be willing to accept a lower return’ (R male 5).
‘I think I unconsciously look less at the risk component when there is a social campaign, and I would also agree with less return when there is a social campaign’ (R female 1).
‘Because of my intrinsic motivation do something good for the world I would look less to the risk component when there is a social campaign [… ] I would agree with a lower return up to 25% of the original return’ (R female 2).
‘I would look less to the risk component when there is a social campaign. But I would not agree upon a lower return. For me it is an investment which has a certain amount of risk and I expect a certain return for it. In that case I would rather donate my money’ (R female 4).
The proposition is poorly supported. In general, men and women have the same perspective towards social campaigns. Both groups argued that some sort of social aspect is important.
Concerning the risk component in combination with the social aspect, five men said they would not look less to the risk component, versus two women. From those, three men and one woman said they would rather donate the money instead of investing it.
Carli (1989) argued that women are more willing to invest in social investments. This is not supported by this research, as both groups think it is important that the campaign has some sort of social aspect. Carli (1989) also concluded that women are more easily influenced.
Combining social entrepreneurs and the risk component, it can be seen that women are more easily influenced by a social campaign when looking at the risk component. Men would rather
40 donate the money; this confirms the findings of Sellappan et al. (2013) that men mainly look at profitability when they invest.
6.5 Herding
The herding effect in crowdfunding is not supported by this research. Eight of the respondents said they would invest when less than 33% of the target amount is collected. This was equally divided between men and women. Although, if a campaign is open longer than 10 days and only 33% of the target amount is collected, most investors would not invest. Only three investors argue that they would, two men and one woman. They argued that if the target amount is not reached they would get their money back.
‘Most of the time before the campaign goes live they already collected 10 to 20%, so then I definitely wait for another 50% to about 70% before I will invest. Besides that I would not invest in a campaign which is open for a longer period of time, say two weeks’ (R male 8).
‘I am mostly one of the first investors. The platform makes sure that the first 10 to 20%
is collected, so when it comes online I will invest immediately. Also because I trust the campaigns which are going live on the platform’ (R male 1).
‘I think it is important that at least the first 33% is collected, but also no more than 70%, because I have the feeling that the first investments can make a bigger difference for the entrepreneur. What also helps if the previous investors made a bigger investment, than I am willing to invest more as well’ (R male 3).
‘For me in previous years the herding effect was bigger. Nowadays the better project are filled within a matter of a few days and sometimes even within hours. Most of the time when 70% is collected I feel comfortable enough to invest’ (R male 4).
‘I will invest when at least 70% is already collected. Sometimes the projects come online at an inconvenient time and therefore I can’t invest immediately. It triggers me to go and read the investment sheet when within two days the target amount is reached or nearly reached’ (R female 1).
‘I definitely take into account the amount that is already collected. I saw a nice project, but it was already online for over a week and there is only eight percent of the target amount is collected’ (R female 6).
41 Nine of the respondents (seven men and two women) saw a mismatch between supply and demand. In the early stage of crowdfunding in 2011, there were not many people who were investing, but nowadays investing in a campaign can be chaotic. These nine respondents felt this could be problematic for future investments. Because of the hype there is not a natural selection between the better and the worse projects.
‘Lately I notice that there is a mismatch between the demand and supply side. Where there are many more investors than campaigns, the campaign is filled within a matter of hours.
This gives me an uncomfortable feeling and I am doubting if the people know where they invest in’ (R male 5).
‘My first investments were mainly based upon how many people already invested in the campaign, if it already reached 60 to 70% of the target amount I would invest, as well. This was some sort of quality check; nowadays this doesn’t hold anymore as most projects are filled within a few days’ (R male 7).
Previous research (Mohammadi & Shafi, 2018 and Astebro et al., 2019) found that herding behaviour is common in crowdfunding. Eight of the crowdfunders (four men and four women) preferred to be one of the first investors, as they want to make an impact for the entrepreneur and argued that the first investments make the greatest impact. Additionally, nine investors noticed a mismatch in the supply and demand and therefore rely less on the previous investors.
Mohammadi and Shafi (2018) and Astebro et al. (2019) found evidence that herding exists.
The respondents in this research argued that this was the case at the start of crowdfunding, but this has changed over time because there is not enough supply.
Zhang and Liu found in 2012 that (popular) campaigns can have a steep exponential increase of investments. This is supported by this research, and investors consider this to be problematic.
Adenzato et al. (2017) determined that women wait longer to invest, but this proposition is not supported by the finding of this research.
42 6.6 Performance of the Platform
Two male respondents said they choose the platform rather than the campaign, versus four women. With regard to trust, both groups equally trust or distrust the platform. Although most investors did not express an opinion about the platforms, they argued that the well-known platforms are trustworthy. They instead follow the project and trust the entrepreneurs on their decision regarding the platform. Both women and men argued that it is important that either the platform or the company keeps them informed during their investment.
‘As an investor you should feel a connection with the platform; in my situation I do not feel that. If the campaigns were held on a different platform I would have invested via that platform. I think platforms can gain a lot by starting to band with the crowd’ (R male 2).
‘I only invested via one platform; they provide all the necessary information I need.
Although I think they make a judgement about their investors, meaning that they are not professionals and therefore some information will not be on the site. When I do not understand the product I will not invest’ (R male 1).
‘The investments I did are made via two platforms. In my case I looked at the investments and followed them closely. I do not feel any connection with the platform’ (R male 3).
‘The information on the platform does not tell me much. Most of the time it is revenue and profit. I trust the platform that they did a more thorough analysis’ (R male 5).
‘The information on the platform is very little. I do not trust the figures or the prognoses; they are way too optimistic in my opinion. The risk analysis is also insufficient;
there are a lot of things that can go wrong which are not mentioned by the platform’ (R male 8).
‘I invest via one platform because I know they are trustworthy. This is mainly because I know the board of the platform. But also because the website is very trustworthy, when you decide to invest you come across a dozen warnings that there are risks involved and that you should be aware of that’ (R female 2).
‘I have invested via several platform, mainly the social campaigns. I invested via these platforms, because of their interface and because I think they are trustworthy. There are a lot of differences between the platforms. On some platforms I can’t make a judgement of the campaign, they only tell their story and do not talk about the financials’ (R female 4).
‘The investments I did were via one platform. I read the Elsevier and they recommended this platform, now that I have some experience I might consider another platform, as well. This will be one of the well-known platforms’ (R female 6).