CROWDFUNDING OF A SMALL BUSINESS: MYTH OR REALITY?
Keywords:
crowdfunding, crowdfunding platform, crowdfunding project, venture financing, business-angel, startup, small businessAbstract
Crowdfunding is a phenomenon of collective funding and is actively developing in recent years. The main directions of crowdfunding projects are technological innovations, social and cultural events. The financing of small businesses, which is not related to high-tech start-ups, is not popular, and, therefore, the purpose of this paper is to investigate the relevance and the potential of a crowdfunding for the financing of small businesses in Ukraine.
To achieve this goal, we should take the current situation on the Ukrainian finance market into account. First, the financing of a small business, which is not an information technology startup, is not a deal for venture capital funds and business angels. Moreover, the venture financing is not fully developed in Ukraine yet. Second, the bank crediting is limited for small businesses. Third, the crowdfunding is just starting its steps in Ukraine. The Ukrainian technological startups realize their projects on the foreign crowdfunding platforms, whereas the Ukrainian platforms focus, first of all, mostly on social projects and, secondly, do not gain the critical mass of projects and followers. Moreover, the traditions of funding, especially the equity crowdfunding of the Ukrainian businesses, are still in its infancy.
To implement the main goal of this paper, we provide the comparative characteristics of the crowdfunding with respect of alternative sources of financing such as venture capital funds and business angels, assess the crowdfunding problems, and offer solutions for them, as well as analyze the differences between small businesses and startups.
Our research has concluded that the greatest success in the small business financing in Ukraine by the crowdfunding can have local business projects based on the needs of local communities.
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