Title: Crowdfunding and entrepreneurial failure: Why do overfunded startups collapse?

Authors: Moritz T. Bruckner; Dennis M. Steininger; Mark Bertleff; Daniel J. Veit

Addresses: Faculty of Business and Economics, University of Augsburg, Augsburg 86135, Germany ' Faculty of Business Studies and Economics, Technical University of Kaiserslautern, Kaiserslautern 67663, Germany ' Lead Business Analyst, Capgemini, Munich 81829, Germany ' Faculty of Business and Economics, University of Augsburg, Augsburg 86135, Germany

Abstract: Crowdfunding has become a viable alternative to traditional venture capital and business angel funding. However, new ventures are prone to failure despite exceeding their funding goals. Extant literature presents broad knowledge of the antecedents of crowdfunding success but lacks insights into the causes and consequences of entrepreneurial failure, especially failure after massive overfunding via crowdfunding. We use a qualitative narrative approach to investigate how massive overfunding in crowdfunding threatens entrepreneurial activities. We present our findings as a taxonomy of the causes of failure, at the environmental, firm, and individual levels, based on actual cases that failed after receiving massive overfunding. Our framework challenges established thinking on resources and financing as measures of entrepreneurial success by providing insights into the processes leading to failure despite availability of resources. This serves as a reference for backers aiming to safely invest via crowdfunding and for startups to avoid the common pitfalls of overfunding.

Keywords: crowdfunding; failure; overfunding; startup; entrepreneurship; taxonomy; information systems.

DOI: 10.1504/IJEV.2022.127453

International Journal of Entrepreneurial Venturing, 2022 Vol.14 No.4/5, pp.602 - 644

Received: 15 Jan 2021
Accepted: 13 Jan 2022
Published online: 05 Dec 2022 *

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