Success Factors in Reward based and Equity based Crowdfunding in Finland

Master’s Thesis 
10 
(
Gompers and Lerner, 2001)
Unfortunately, businesses are at times forced to run 
through the cycle at too fast a pace. According to Manchanda and Muralidharan 
(2014) 
venture capitalists have been blamed for leading the businesses to premature 
Initial Public Offerings. This has heavy implications for the businesses. Due to these 
kinds of practices the venture capital industry has been losing their trustworthiness in 
the eyes of the entrepreneurs.
2.1.4. Business Angels 
Businesses can also obtain funding from business angels. Business angels are high net 
worth individuals who invest a portion of their assets in high-risk, potentially high-
return ventures (Feear et al., 1994). Unlike other funding sources, business angels are 
individual people and thus have a great amount of heterogeneity amongst them. They 
also have little consistency in their approach to investing as a group. (Mason and 
Stark, 2004) 
Business angels include both people with experience in investing in entrepreneurial 
ventures and people with no investment history, but a desire to enter the market. Both 
of these groups prefer investing in ventures when they have gotten past the seed fund-
ing stage – that is to say, in later stages of development. Preference is also to invest in 
ventures that are located close to home. (Feear et al., 1994) 
Similar to venture capitalists, business angels are focused on the growth potential of 
the business and expected returns. They look through business figures, but are more 
interested in the market as a whole – its size, growth and level of competition. How-
ever, unlike other funding alternatives, business angels have a very hands-on ap-
proach. They place emphasis on their relationship with the entrepreneurs and the 
business – meaning they look for interesting and fun investment opportunities with 
which they feel emotionally attached to. Due to the high level of heterogeneity 
amongst business angels, entrepreneurs should be persistent in looking for funding. 
Where as one business angel might not be interested in the venture, another might feel 
attached to it. (Mason and Stark, 2004) 

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