A shift in power? Value co-creation through successful crowdfunding

Crowdfunding has emerged as an alternative to traditional sources of finance such as bank loans and angel funding. In the post COVID-19 era where finance will be likely to become more difficult for small firms to access, crowdfunding has the potential to be an even more important part of entrepreneurial funding, and enable firms previously denied opportunities the chance to grow. This makes understanding crowdfunding important from a social as well as financial perspective. The paper explores how crowdfunding enables value co-creation. It does so by analysing interview data with start-ups who raised money through crowdfunding and then compares these findings with the views of traditional funders. The findings from the study highlight the speed of raising finance and the avoidance of financial monitoring controls as key sources of value co-creation, along with the increased negotiating power with traditional funders and retail partners that comes from achieving validation, i.e., providing evidence that there is demand for the start-up's products. The validation enables the entrepreneur to increase value capture from their interactions with further funders and business partners. The temporal dimension is crucial as a successful crowdfund can shift power towards the crowdfunded firm and away from other participants.