Armin Schwienbacher, Professor of finance at SKEMA Business School
Current PhD students Involved:
Cheng Cheng – Venture capital in emerging markets
Gael Leboeuf – Crowdfunding, and serial entrepreneurship in crowdfunding
Thomas Standaert (co-supervision Ghent Univ.) – Government-related venture capital programs
Xavier Walthoff-Borm (co-supervision Ghent Univ.) – Economic impact of crowdfunding on startups
Entrepreneurial finance deals with the financing of small and medium-sized (SME) businesses, typically with a special focus on high-growth, innovative and entrepreneurial startups (Cumming, 2013)* . This may include different forms of finance, such as equity finance (including venture capital, founder finance, business angel finance, and friends & family) and debt finance (e.g., bank loans). Moreover, one single source of finance may be provided by different types of investors, such as venture capital that is provided by independent funds as well as (bank- or corporate-) affiliated funds.
While entrepreneurial finance is not a new research topic (past research has primarily focused on venture capital, corporate venture capital and angel finance; see Da Rin, Hellmann, Puri, 2013, for a survey of recent research)** , recent trends have emerged that are likely to transform the financial landscape of entrepreneurial finance in the near future. These trends include:
• The emergence of crowdfunding as a new form of dis-intermediated source of entrepreneurial finance: the total volume of funds raised through crowdfunding (all forms of crowdfunding cumulated) worldwide in 2015 was close to the total volume of new capital raised by VC funds (The Economist, 2015), indicating that crowdfunding has already become a significant source of funding; while equity crowdfunding remains a small portion of total volume, it is expected to grow quickly as a result of the recent implementation of the JOBS Act by the US regulator SEC at the end of last year.
• The recent growth in investments in fintech ventures: a new wave of fintech investments has emerged after the 2008 financial crisis (Fintech 3.0 and Fintech 3.5; Arner, Barberis and Buckley, 2015)*** that is let by innovative startups instead innovations driven by incumbents (Fintech 2.0); the global volume of investments in fintech ventures amounted to $12.21 billion in 2014, which is three times more than in 2013 (Accenture, 2015). It is argued that the fact that many very skilled people lost their jobs during the financial crisis has generated a supply of entrepreneurial projects in finance and thus greater demand for more funds from fintech ventures. Moreover, the financial crisis has triggered more regulation and greater scrutiny by regulators for incumbents (esp. banks), providing incentives to fund investments outside incumbents that are less subject to strong regulation (crowdfunding is a good example).
• The digitalization of venture finance and new forms of entrepreneurial collaborations: the Internet and especially social media has accelerated the pace of innovations and created new ways for individuals to communicate at virtually no costs and to collaborate on entrepreneurial initiatives. These changes will put strong pressure on incumbents (including banks) to keep up with this pace of innovations, since it is characterized by significant first-mover advantages and winner-takes-almost-all type of market outcomes. Such a zero-marginal-costs society will provide benefits for lean and horizontal organizations (Rifkin, 2014)**** , forcing incumbents to adapt their own business models and structure.
All these trends raise questions about the ultimate impact on financial markets, on entrepreneurial initiatives, and on how regulation can cope with these new trends to protect investors in the future. The research initiatives at SKEMA intend to offer insights into some of these issues.
As part of the research activities of the Finance and Accounting Research Center (ECCCS), SKEMA Business School has initiated several research projects and collaborations to develop in-depth expertise in entrepreneurial finance and in particular in digital entrepreneurial finance. Broadly speaking, these initiatives may contribute to:
- increase interaction between academic and professional community
- create courses on the topic for MSc students at SKEMA, one of which is "Venture Capital, Crowdfunding and Fintech" in the MSc Corporate Financial Management Program
- create and highlight the "impact" of research on students by better linking research activities done inside SKEMA with existing teaching programs proposed by SKEMA
- create more visibility to research activities done inside SKEMA and thus create more value from SKEMA's research output
* Cumming, Douglas (2013). The Oxford Handbook of Entrepreneurial Finance. Oxford University Press.
** Da Rin, Marco, Thomas Hellmann and Manju Puri (2013). A Survey of Venture Capital Research. in: Handbook of the Economics of Finance. Elsevier.
*** Arner, Douglas W., Jànos Barberis and Ross P. Buckley (2015). "The Evolution of FinTech: A New Post-Crisis Paradigm?" Available on SSRN: http://ssrn.com/abstract=2676553.
**** Rifkin, Jeremy (2014). The Zero Marginal Cost Society: The Internet of Things, the Collaborative Commons, and the Eclipse of Capitalism. Palgrave Macmillan.