Crowdfunding of SMEs and startups: When open investing follows open innovation

Crowdfunding is currently booming, and it appears as a valuable alternative to finance startups and SMEs. In this chapter, we advise scholars to study the relationship between crowdfunding and open innovation. On the one hand, under this new way of financing, firms receive money as well as feedbacks and suggestions from crowdfunding investors who pledge money on the Internet. On the other hand, earlier open innovation activities and social networking allow SMEs to reduce information asymmetries and exploit the market of potential funders. Then, we take stock of contributions on the prominence of social capital in crowdfunding to discuss the linkages among crowdfunding, social capital, and open innovation. To this end, we define the concept of social capital and review the contributions, which study it in the crowdfunding realm. Finally, we describe three interesting cases of SMEs from the Crowdcube platform (goHenry, JustPark, Monzo), showing how these SMEs leveraged their social relations with extant customers and innovative users to raise equity capital.