Is Crowdfunding an Alternative Financial Model for Social Enterprises?

Abstract

Social enterprises face difficulties in financing. Because investors concentrate too narrowly on risk and return, social enterprises may have difficulty competing with commercial enterprises for investment capital. In this context, loans and equity financing have not been adequately examined, and their growing importance in financing enterprises makes it important to understand their implications for social enterprises.  We discuss the fact that crowdfunding represents values that are attractive to social enterprises. In addition, crowdfunding sometimes offers higher value or more capital to social enterprises, compared to other sources of funding. We find that several benefits are particularly important in the start-up phase of a business. However, crowdfunding can also result in greater stress for the management team and can take time and resources. Entrepreneurs must also take into account factors such as public discomfort when campaigns have failed.