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Unleashing main street entrepreneurship: Crowdfunding, venture capital, and the democratization of new venture investments

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Abstract

Over the past several decades, U.S. venture capital (VC) firms have focused their attention and investment dollars in specialized regional hubs where high-tech entrepreneurship tends to flourish. As a result, “main street” businesses such as retail stores, consumer services, and other non-tech businesses typically find it incredibly difficult to secure equity funding. Yet, in recent years, crowdfunding (CF) has become a viable new source of funding for entrepreneurs. Using a longitudinal assessment of VC and CF at the national, regional, and sector levels in the USA, we demonstrate how the emergence of CF has unlocked new growth opportunities for main street entrepreneurs, particularly those located in underserviced funding regions. Likewise, we expose how CF augments national and regional funding patterns by re-allocating funding to industries that VCs typically do not fund. Lastly, we discuss the practical and theoretical implications of what appears to be a shifting venture funding regime, and shed light on CF’s potential role in enhancing the resurgence of main street entrepreneurship across the USA.

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Notes

  1. The eight states not significant include WV, SD, NE, MS, MI, ME, IL, and FL.

  2. t tests were used to evaluate if there was a statistical difference between the 13 quarters of the pre-CF period and the inception period using quarterly data.

  3. “Gazelles” is a term commonly used to identify fast growth firms while “Unicorns” is a term commonly used to identify venture-backed private companies founded after 2003 that had grown in value to at least $1 billion.

  4. Notable exceptions include Fisher, Kuratko, Bloodgood, and Hornsby (2017) and Mollick and Nanda (2016)

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Authors and Affiliations

  1. Kelley School of Business, Indiana University, Bloomington, IN, 47405, USA

    Regan M. Stevenson & Donald F. Kuratko

  2. College of Business, University of North Texas, Denton, TX, 76203, USA

    Jared Eutsler

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  1. Regan M. Stevenson
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  2. Donald F. Kuratko
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  3. Jared Eutsler
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Correspondence to Donald F. Kuratko.

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Stevenson, R.M., Kuratko, D.F. & Eutsler, J. Unleashing main street entrepreneurship: Crowdfunding, venture capital, and the democratization of new venture investments. Small Bus Econ 52, 375–393 (2019). https://doi.org/10.1007/s11187-018-0097-2

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