Advantages And Disadvantages Of Ecf

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Over the years the four main types of CF were developed: the donation-based, the reward-based, the lending CF and the equity CF (ECF). This chapter is analyzing ECF, as the authors found it most interesting from the aspect of the financial management theory and innovative contribution to the financial practice. “The innovative aspects of equity crowdfunding lie in the interaction of the financial sphere with the social one.” (Nasrabadi 2016, 207) As well, the ECF is been considered innovative as it is using innovation to fill the start-up funding gap that occurs as the result of the perception of the start-up and creative industries projects as a high-risk, insufficiently collateralized and therefore unattractive to traditional creditors. (Nasrabadi…show more content…
By the Valančiene and Jegelevičiute (2014, pp. 206) the CF platforms are of high importance as of their role in setting up of the ECF processes, defining the minimum level of information provided by the issuers for the investors, transparency and safeguards set to minimize the ECF risks as well controlling the ways the ECF process is being carried out. Guidici et al. (2017) believe that the CF has mainly social and emotional level and as to its concept of relying on a crowd good judgment and the belief of future profits. The investors will decide to fund the project if “the amount of money to be invested is low enough to consider negligible any subsequent loss, the project has a strong emotional content, and returns create an exclusive non-monetary benefit, that may be shared only among the financiers, enhancing the social and emotional nature of the deal.” (Giudici at al., 2012, pp.…show more content…
27-28; Bago and Pilipović, 2016, 34). “For now, the European Commission declaratively supports and promotes crowdfunding, but hasn’t announced the intention to more closely regulate it.” (Blace and Grubisic, 2017, pp.
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