Equity Crowdfunding: Tools, Strategies, and Impacts on Business Financing by Pasquale Stefanizzi and Federica Cavallo
The emergence of equity crowdfunding represents a significant break from the past in corporate financing, not only for startups but also (perhaps primarily) for SMEs with ambitions for growth.
It is well known (Onado M., 2011) that the nature of capital sources for Italian companies has historically been “bank-centric,” meaning that the capital required over time has primarily come from the banking system. However, in order to mitigate credit risk, banks have traditionally offered financing on terms that best suited their own needs rather than those most aligned with business requirements.
Indeed, Italy has traditionally been characterized by the development of family businesses, which have often prioritized family wealth accumulation over corporate growth, leading to small and medium-sized enterprises with high levels of debt and weak capitalization. In this regard, recent literature (Blanco-Mazagatos et al., 2024) has observed that family businesses make financial decisions (especially those concerning increased bank debt) based on socioemotional factors (SEW). Moreover, family businesses that place greater emphasis on continuity and generational transfer tend to rely more heavily on debt, as it is considered a tool to support growth and ensure the succession of the company to future generations.
Furthermore, although some prominent figures have attempted to associate their names with the venture capital and business angel segments, these financing methods have never truly taken off in Italy. The primary reason for this lies in the social structure of the average national investor, who tends to have a very conservative risk-return profile (it is worth noting that Italians have been referred to as “BOT people”).
For these very reasons, the introduction of crowdfunding from abroad, combined with growing governmental and regulatory awareness (and likely even a prior social shift), has led to the democratization of direct investment in corporate equity. This has allowed a broad base of investors to participate in corporate financing in exchange for an equity stake (equity crowdfunding). In fact, the aforementioned conditions have also paved the way for the adoption of lending crowdfunding, whereby the investor becomes a financial creditor of the company rather than a shareholder.
