Equity Crowdfunding: Solutions and Structures

To provide a low-risk and efficient use of this new method of financing in Iran, we identified challenges and complexities of this method and solutions to overcome them. There is a lack of experience and use of this model in the country, which indicates the importance of research.This study aims to fill the existing scientific and empirical gaps by gathering and integrating the experiences of applying this method in different countries and gathering expert advice in this field. In addition to the challenges associated with this method of funding, it has a much higher level of complexity than other crowdfunding methods, which naturally increases its risks.

We conducted semi-structured interviews with experts in this field to accomplish this. After doing 9 deep and semi-structured interviews, theoretical saturation was obtained and categories were extracted after completing open, axial, and selective coding processes.

The data from these interviews were analyzed by the Strauss and Corbin paradigm method. The output results of the analysis were classified into 4 categories of causal conditions, context conditions, intervening conditions, and strategies. Factors such as the incompleteness of monitoring infrastructure and the problem of economic stability in the country were classified as context conditions, and risk of false accounting, price challenges, and exit problems was classified in the causal conditions category. Also, mental models of investor's decision making such as behavioral motivations and selection factors of crowdfunding projects were identified as intervening conditions.

This research showed that investor behavior can be affected by external factors such as other people and the economic environment significantly. The most important economic factors are market interest rate, credit ceilings of banks, parallel market conditions, and inflation rate. This research shows that the relationship between equity crowdfunding and parallel markets is inversely proportional to the inflation rate. One of the other solutions that this research has to reduce the existing challenges is to determine the ceiling of the amount of the project's value in proportion to the history of the platform's previous performance to prevent shaping obstacles for investors, entrepreneurs, and platforms. The results also showed that voluntary recommendation from platforms has a valuable role in the investors' success and promotion of equity crowdfunding. The main part of the research conducted in this field is based on existing methods and existing platforms. But what is rarely seen is an attempt to provide a new financing model, which can be may achieve a new way of financing by using various instruments and prior knowledge. The researcher can try to mix new theories such as cryptocurrency technology with the classic models of financing and investigate its optimal legal exigency to lead to the creation of a superior crowdfunding system.