Is Crowdfunding doomed in Sweden?

When institutional logics and affordances collide, (re-)design

mattersRESEARCH-IN-PROGRESS PAPER

ICIS, MILAN 2013

Project Researchers Claire Ingram

◦ Research Assistant /PhD Student◦ Stockholm School of Economics, Sweden

Robin Teigland◦ Associate Professor◦ Stockholm School of Economics, Sweden

Emmanuelle Vaast◦ Associate Professor◦ McGill University, Canada

Worldwide: 800+ platforms,Approx $2.6bn

raised(Massolution, 2012)

Europe: Approx $945m

raised(Massolution,

2012)

Sweden: Approx $1m

raised

Image: Adapted from growvc.com, numbers in May 2013

The Puzzle“We haven’t had that many projects, and the projects we’ve had haven’t really held the kind of quality that we had hoped for... And we don’t know why.” - Institutional Actor, Stockholm

“I don’t get the feeling that crowdfunding is the new thing and we can forget everything else. That’s not the feeling I have and that’s not the talk I hear.”- IT entrepreneur, Stockholm

Literature : Technology Affordances

Affordances Institutional Logics

Material Social

Featurescreated by designers

Literature: Institutional TheoryActors embedded in environment defined by cognitive, normative and structural considerationsPressure towards stasisLimited human agency

(Battilana et al. 2009)

Focus here specifically on Institutional logics, which are part of a broader, accepted belief system about what constitute legitimate expectations and goals within a shared field.

(Thornton, 2002)

Role of Institutional Entrepreneur

“Social contexts present entrepreneurs with many constraints, yet they also set the conditions that create windows of opportunity.”(Aldrich and Fiol, 1994: 649)

Change agent/ Institutional

Entrepreneur

Actors in institutional field being changed

Actor must fulfill two conditions: 1) initiate divergent changes and 2) actively participate in the implementation of these changes. (Battilana et al., 2009)

Theoretical Integration Actors [Crowdfunding platforms] behave not only as the designers of the technological system that promote technical features, but also as institutional entrepreneurs who actively try to affect institutional logics to encourage the emergence of new affordances of a system.

Integration of technology affordance with institutional entrepreneurship as a promising angle to develop a more fine-grained understanding of an institutional change process, and in particular account for both agency and institutional embeddedness in assessing what is required for crowdfunding to become perceived as a viable funding model.

Methodology• Chose 10 initial entrepreneurs from

database from Internetdagarna based on:• Number of FB friends• Size of LinkedIn network

• 80% response rate

• Asked them to refer us to others – mostly other entrepreneurs

• Also looked up 2 repeat funders based on public data on FundedByMe

• Also interviewed two crowdfunding platform creators

Investigating not just the entrepreneur but also the geographic communities and organizational fields within which the entrepreneur is embedded (Marquis and Battilana, 2007).

This will enable us to analyze the interplay between the existing institutional logic and the nascent, developing institutional logic (DiMaggio, 1988; Garud, Hardy, and Maguire, 2007; Maguire, Hardy, and Lawrence, 2004).

First round of Interviews (January 2013)

1. Entrepreneur Mobile questionnaire

2. Entrepreneur Co-working space

3. Entrepreneur Crowdsourced food data

4. Entrepreneur Online education

5. Entrepreneur Digital design agency

6. Entrepreneur Online storyboard

7. Entrepreneur Co-working space

8. Entrepreneur Digital storytelling

Second round of Interviews (April-May 2013)

9. Entrepreneur Blog aggregation tool

10. Repeat funder

11. Institutional Actor Business coach

12. Repeat funder

13. Institutional Actor Not-for-profit agency

14. Entrepreneur Travel experience app

15. Entrepreneur Clothing size simulator

16. Entrepreneur Wifi-sharing app

17. Entrepreneur Student competition site

18. Entrepreneur Crowdfunded advertising

19. Institutional Entrepreneur? Equity crowdfunding site

20. Institutional Entrepreneur? Mixed crowdfunding site

Initial findings Prevalent institutional logic: “We were kind of in the mindset of getting like a good investor in; someone who could add something. And that’s still our perspective. The kind of guys who invested in us are really good investors, impressive investors and they add a lot to the company other than money. I wouldn’t say it was easy to raise money, but we had a really good case.” - Entrepreneur

First attempt at Institutional EntrepreneurshipFocus on crowdfunding as disruptive in funding – as a substitute for existing sources of funding.Physical design of site emphasises this narrative – money raised in large font, emphasis on giving money and tracking how much has already been received. The prominence with which both the amount of money raised and the progress bar were displayed would indicate that the primary feature of the platform is on funding the project above all else.

Features and Logics collide Interviewees mentioned venture capital, angel investment, state grants and so-called “soft loans” provided by state institutions as the primary sources of start-up funding. Although two entrepreneurs had actually tried crowdfunding, few volunteered it as a viable source of funding and when pressed expressed hesitancy to use the platforms.

One entrepreneur explained his reluctance to go for crowdfunding as he viewed the funding options as a kind of hierarchy, with VC investment as the “cream of the crop” investment and crowdfunding at the bottom.

Similarly, another entrepreneur noted that taking grants and soft loans did not give a business as much credibility as obtaining equity funding although she was not sure where crowdfunding fit into that assessment.

Second attempt at Institutional EntrepreneurshipLittle change in the physical appearance of the sites

Narrative around crowdfunding as complementary to other forms of financing introduced. One platform argued that crowdfunding, rather than being a funding tool, could be used for publicity as well as to test the market: “…so it’s not always about the money, but I think for certain your money is a positive side effect, but there are certain other things that crowdfunding brings to the table, it could be crowdsourcing, it could be connecting with other people, it could be simple information – it’s basically feedback at an early stage that could make or break your idea.”

Other platform outlined that their strategy as a crowdfunding platform was to involve large investors in crowdfunding, not just “ordinary people”: [So you are seeing business angels with large amounts coming in and investing through crowdfunding platforms?] “Yes, you have innovative and early stage Business Angels who … want to invest 1 million in an early stage of this company, but [say] ‘if I do this, I want also to have a position at the table’, to have influence in the company.”

Ongoing research – comments welcome!

Theoretical integration?Holes in logic?Anything else?

Thank you!

Image via NewYorker.com