How do backers manage investment uncertainty in equity crowdfunding?

This thesis aims to understand how investment uncertainty is managed in equity
crowdfunding (ECF). It does so by exploring backer behaviors at different stages of the investment decision process during funding windows, based on information and communication technology (ICT) and innovation. The included papers in this thesis are also linked to a conceptual model for an overall view of backer behaviors during this phase of the investment decision process. This expands the research on investment decision-making in this domain and provides insights regarding the management of investment uncertainty in ECF.

ECF is a result of the fintech revolution supported by ICT and innovation as key
catalysts. These catalysts have created a structural change in early-stage financing, which is burdened by investment uncertainty. Investment uncertainty arises from information asymmetry, and highlights the importance of information availability in managing uncertainty. However, the absence of face-to-face meetings with entrepreneurs and the lack of knowledge among backers are key concerns in the investment decision process. This reduces access to information and reduces the possibility of making independent and accurate decisions. Hence, backers must find ways to obtain information, and ICT-driven innovations have become an important solution to this problem. In contrast to traditional funding alternatives in this domain, ECF offers unique opportunities based on social capital (the wisdom of the crowd) and context (designed functionalities). These opportunities have full potential during funding windows on digital platforms and come in the shape of interactions and collaborations vital for ICT-driven innovations.

This thesis comprises four papers. Paper 1 analyses the conditions for ICT and
innovation that lead to structural changes. Paper 2 evaluates the characteristics
embedded in demand-driven signals from discussion boards. Paper 3 explores
investment dynamics based on signaling during funding windows. Finally, Paper 4 examines investment strategies based on investor type and portfolio theory.
Consequently, Paper 1 presents the conditions for this phenomenon to occur, while Papers 2-4 explore how this affects backer behaviors in relation to theoretical models to draw conclusions about the management of investment uncertainty.

Various patterns emerged from these studies. First, the drivers of ICT and innovation can be clustered and positioned within the innovation lifecycle. Early in this lifecycle, they rely on networks based on interactions and collaboration for new knowledge production. Second, backers tend to appreciate clarity in feedback loops (answers) based on demand-driven signals (questions) from discussion boards when evaluating. Third, some backers invest early, whereas others invest late and receive all available signals during the funding windows. Fourth, more sophisticated backers invest more aggressively than less sophisticated ones. Hence, all patterns depend on ICT and innovation, and enable conclusions about the management of investment uncertainty
during funding windows in ECF.