Crowdfunding:A Study of Risk Factors

Crowdfunding provides real-time financial assistance through internet banking services to those entrepreneurs who aspire to start their ventures. The fund lenders show an inclination to fund in those ventures wherein the risks are more. This research study examines the awareness of risks of these fund lenders', who decide to part with their hard earned income for benefitting some cross-sections of society either directly or indirectly. The aims of this study are: (i) to critically appreciate the fund lenders awareness about potential risks involved in crowdfunding events; and, (ii) to examine the impact of high or low awareness as they contribute their surplus money towards crowdfunding events in the form of shares, loans, donations or in anticipation of rewards. A quantitative methodology with primary data collection was adopted for this study. Data was collected from 139 respondents at two instances with a 6-month time interval. Statistical tests like the Wilcoxon Matched Paired Signed Ranking Test were then used to empirically test the research propositions. This study attempts to highlight the degree of informed consent which people have and the factors they consider seriously prior to lending or pledging funds in crowdfunding events, and to assess the impact of 'risk awareness' and 'risk ignorance' among the potential fund lenders in crowdfunding and its effect on the fund leaders' willingness to adapt to new situations.