Crowdfunding for Hospitality Ventures

Abstract

Crowdfunding can raise funds in the absence of traditional financing sources. This research brief provides guidance on the effective use of crowdfunding by hospitality entrepreneurs. Our research (Belavina et al. 2020) shows that crowdfunding advantages go well beyond cash infusion. Significant benefits of using crowdfunding stem from the ability to acquire early information on a venture’s viability. This early information helps avoid investment in ventures with low market potential. Thus, hospitality entrepreneurs should use crowdfunding for venture selection, not just funding. Further, counterintuitively, our research shows that entrepreneurs are better off if they use platforms that impose fund release restrictions. These restrictions help build backer confidence, thus, bringing in more funds and better information from the crowdfunding campaign. Finally, we identify fund release restrictions best suited for hospitality ventures. This finding highlights the opportunities for building hospitality-centric crowdfunding platforms.