Over the past two decades, social enterprises have increasingly attracted scholarly attention. Social entrepreneurship leverages business practices to tackle social and environmental issues and is characterized by integrating commercial enterprise models with nonprofit missions. Key factors such as financial sustainability and organizational resilience are crucial for advancing social objectives. Despite the absence of a universally accepted definition, social entrepreneurship involves elements like social innovation (SI), market orientation and social value generation. The purpose of this study is to examine the role of equity crowdfunding as a financing opportunity for social enterprises (SEs).
This study uses a multiple case study analysis.
This study reveals the potential of equity crowdfunding as a mechanism to foster social innovation and generate positive societal impact. The findings suggest that equity crowdfunding can play a meaningful role in addressing the funding gap faced by social enterprises, thereby supporting the achievement of their social missions.
This research provides insights into the role of equity crowdfunding in social entrepreneurship, a relatively underexplored area. This study underscores the importance of financial tools in facilitating SI and advancing the missions of SEs.
1. Introduction
In the past two decades, the field of social entrepreneurship has witnessed a significant increase in scholarly attention (Boni et al., 2024; Defourny and Nyssens, 2013; Glasbeek et al., 2024; Hietschold et al., 2023; Nuchian et al., 2024; Quilloy et al., 2024). Scholars frequently describe social entrepreneurship as leveraging business practices to address critical social and environmental issues (Haugh, 2007; Mair et al., 2012; Santos, 2012). Within this broader field, social enterprises (SEs) represent one of the primary organizational forms through which social entrepreneurship is operationalized. A wide range of definitions for SEs can be found in the literature. Numerous studies have sought to clarify the complex concepts and models associated with SEs (Borzaga and Defourny, 2001; Defourny et al., 2021). However, a shared understanding or unified definition remains elusive, reflecting the multifaceted nature of the concept (Defourny et al., 2021; Defourny and Nyssens, 2017).
Although there is no universally accepted definition, social entrepreneurship is broadly recognized through a framework encompassing a social entrepreneur or entrepreneurial team, organizational structure, social innovation (SI), market orientation and social value generation (Choi and Majumdar, 2014).
In this context, SI refers to developing more effective, efficient or sustainable solutions, addressing market failures and reducing public spending while promoting societal well-being (Bautista-Gómez and van Niekerk, 2022). This approach to entrepreneurship, which can unfold within new and existing organizations (Mair and Marti, 2006), is distinguished by its primary focus on achieving a social mission, contrasting with the profit-driven motives of traditional commercial entrepreneurship (Saebi et al., 2019).
In addition to SEs, some novel forms of legal entities aim to generate stable profits while significantly mitigating social and/or environmental issues through their business operations. These organizations are often called “social impact businesses,” “societal impact enterprises” or “impact enterprises.” The distinction between SEs and societal impact enterprises lies in their primary goals. SEs focus on creating more social value for target populations or communities to achieve long-term sustainability, while societal impact enterprises prioritize profitability alongside their commitment to addressing societal challenges (Vecchi et al., 2016). According to Ferrarini et al. (2019), social impact enterprises are intermediaries between civil society organizations and for-profit companies. These enterprises can be legally constituted as for-profit organizations while focusing entirely on solving social and/or environmental problems directly through their core economic activities (Ferrarini et al., 2019). Within this evolving ecosystem, concepts such as blended value (Emerson, 2003) – which emphasizes the integration of financial, social and environmental returns – social finance (Daggers and Nicholls, 2016; Nicholls, 2010) – referring to investment mechanisms designed to achieve both financial returns and measurable impact – and the related tradeoffs between these objectives (Brest and Born, 2013) are central to understanding how SEs attract mission-aligned capital.
Although these enterprises combine profitability with impact, many studies highlight significant barriers that hinder their growth or contribute to their failure. A recurring challenge is the funding gap, which arises because the focus on social value is often less attractive to traditional capital lenders, such as banks, private equity investors or venture capitalists (Cosma et al., 2019; Davies et al., 2019; European Commission, 2015; Hynes, 2009; Lyons and Kickul, 2013; Santos et al., 2015). Evidence from prior research suggests that alternative financing mechanisms (Carè et al., 2018; Carè and Weber, 2023), such as crowdfunding, can help bridge this gap by facilitating the growth of social and impact enterprises. Among these mechanisms, crowdfunding stands out as a model where entrepreneurial individuals and groups – cultural, social and for-profit – seek funding for their ventures by leveraging small contributions from many individuals through the internet, bypassing traditional financial intermediaries (Mollick, 2014). However, despite its transformative potential, research examining the specific role of crowdfunding in financing SEs and initiatives aimed at generating positive societal impact remains limited, leaving a critical gap in the literature.
Building on the existing literature, this study identifies two specific gaps. First, while alternative finance has been discussed in connection with social entrepreneurship, the specific contribution of equity crowdfunding to the growth and operational sustainability of SEs remains underexplored. Second, few studies have examined how equity crowdfunding fosters mechanisms such as trust, transparency and alignment between social mission and financial expectations – critical for the long-term success of SEs.
To address this gap, this paper examines how equity crowdfunding can support SEs in creating positive societal impacts, fostering SI and driving social change by overcoming traditional barriers to financial investment. Given the limited number of theoretical studies addressing this emerging topic, we adopt a grounded theory methodology based on multiple case studies (Corbin and Strauss, 2008; Eisenhardt, 1989; Yin, 2013). In particular, this study contributes to addressing these gaps in three main ways. First, it advances theoretical understanding by exploring how equity crowdfunding enables SEs to generate social and environmental value through mechanisms such as transparency, mission alignment and investor trust. Second, it offers a methodological contribution by applying a grounded theory approach based on multiple case studies – an underused method in this field – which allows for an in-depth, inductively derived conceptualization. Third, it provides practice-oriented insights for social entrepreneurs and crowdfunding platforms, highlighting the strategic importance of impact communication and relational dynamics in ensuring both funding success and long-term societal engagement.
Our findings reveal that equity crowdfunding is a viable mechanism for bridging the funding gap faced by SEs, providing them with access to diverse financial resources while enhancing their ability to generate social and environmental value. By highlighting the critical role of transparency in impact measurement and fostering trust-based relationships with socially motivated investors, equity crowdfunding emerges as a powerful catalyst for innovation and societal impact within the SE ecosystem. The subsequent sections are structured as follows: Section 2 provides the theoretical framework, while Section 3 outlines the research methodology using a grounded theory approach based on multiple case studies. Section 4 explains the case study analysis. The main findings are presented in Section 5, and Section 6 concludes with contributions to theory and practice alongside the implications and limitations of this study.
2. Theoretical framework
2.1 Setting the scene: Exploring the contribution of social enterprises and impact ventures to the most pressing societal challenges
The term “social entrepreneurship” refers to innovative and creative approaches adopted by a diverse group of actors, including grassroots activists, non-governmental organizations, policymakers, international institutions and corporations, to tackle various social challenges (Nicholls, 2008). Among these, SEs represent a key organizational form through which SI can be observed and implemented (Phillips et al., 2019), particularly in sectors such as justice, environment, education, health, arts and culture.
SI is defined as:
[...] a novel solution to a social problem that is more effective, efficient, sustainable, or just than existing solutions and for which the value created accrues primarily to society as a whole rather than private individuals (Phills et al., 2008, p. 36).
This close alignment with societal impact positions SEs as natural carriers of SI, enabling them to drive change across various domains (Defourny and Nyssens, 2013; Harrisson et al., 2010; Tortia et al., 2020). SEs are often characterized by features such as voluntary participation, operational independence from the state and a commitment to the “triple bottom line” of people, planet and profit (Betts et al., 2018; Jones and Keogh, 2006). By pursuing both financial returns and social impact, social entrepreneurs address societal challenges that traditional approaches have often failed to resolve (Betts et al., 2018). However, their hybrid nature also introduces unique challenges, such as maintaining a balance between social and financial missions, managing scarce resources and meeting diverse stakeholder expectations (Doherty et al., 2014).
The role of SI is further emphasized in definitions of SEs, where innovation is often central to their mission and operations. Perrini and Vurro (2006) introduced the concept of “socially innovative entrepreneurs” (p. 57), while Austin et al. (2006) described SEs as “innovative, social value creating activity that can occur within or across the nonprofit, business, or government sectors” (p. 371). Additionally, the literature on SEs often uses a range of terms and labels to describe organizations with overlapping goals and characteristics, such as “social impact businesses,” “societal impact enterprises” and “impact enterprises.” These novel forms of legal entities, collectively referred to as social purpose organizations, are designed to achieve both stable profits and meaningful social or environmental impact (Lepik et al., 2022).
Grabenwarter (2011) highlights that social impact businesses are uniquely positioned to attract capital from both for-profit and not-for-profit investors because of their ability to deliver meaningful societal outcomes while ensuring attractive financial returns (pp. 2–3). Positioned at the intersection of the private and philanthropic sectors, these organizations prioritize their social mission while maintaining financial sustainability (Bezerra-de-Sousa et al., 2022). Vecchi et al. (2016, p. 65) further explain that the social or environmental impact of these enterprises is embedded in their commercial business models, allowing them to address societal demands effectively while achieving profitability. Simply put, they generate societal impact by selling products or services, creating both financial returns and positive outcomes (Vecchi et al., 2016).
A key distinction between SEs and societal impact enterprises lies in their primary objectives. While SEs aim to create long-term social value for specific populations or communities to promote sustainability, societal impact enterprises balance profitability with addressing specific societal challenges (Vecchi et al., 2016). This distinction highlights an ongoing debate within the academic community about the role and positioning of social impact enterprises. Ferrarini et al. (2019) suggest that these entities can be placed along a spectrum, ranging from civil society organizations to for-profit companies. Even when adopting a for-profit legal structure, social impact enterprises remain committed to solving social or environmental issues through their core business activities.
2.2 Understanding crowdfunding as a potential accelerator for social impact by starting from the funding gap for social enterprises
The survival, economic prosperity and societal impact of SEs largely depend on their ability to secure financial resources (Austin et al., 2006; Doherty et al., 2014; Schätzlein et al., 2023; Zhao and Lounsbury, 2016). However, critical barriers continue to hinder their growth and, in some cases, contribute to their failure. Among the most significant challenges are a lack of resources, small business size and limited access to finance and funding (Leslie, 2002; Staicu, 2018). These structural limitations are further aggravated by issues such as inadequate premises, a shortage of qualified staff and cash flow constraints (Brown and Murphy, 2003; Coburn and Rijsdijk, 2010; Staicu, 2018). Such obstacles make it particularly difficult for SEs to attract financial support from traditional lenders, such as banks, private equity investors or venture capitalists, who often view SEs as less attractive because of their prioritization of social value over financial returns (Cosma et al., 2019; Doherty et al., 2014; Lyon and Owen, 2019).
Systemic challenges further exacerbate the funding gap. Bielefeld (2009) points out that inconsistent funding priorities, unclear investor goals and limited trust between investors and enterprises can significantly impede access to finance. Abdou and El Ebrashi (2015) emphasize that impact ventures, which are for-profit enterprises with a social mission, frequently rely on personal networks, founders or grants from international donors to survive or even launch. Additionally, limited public awareness about SEs creates further hurdles in securing financial resources, restricting their growth potential (Davies et al., 2019; European Commission, 2015; Hynes, 2009; Santos et al., 2015). These persistent challenges highlight the pressing need for innovative financing mechanisms to bridge the funding gap that affects both SEs and impact ventures (Lyons and Kickul, 2013).
In response, crowdfunding has emerged as a promising alternative financing mechanism, particularly for SEs and impact ventures (Chandna, 2022; Hussain et al., 2023; Lehner and Nicholls, 2017; Riniker, 2024). Crowdfunding leverages an open call, typically conducted online, to solicit financial contributions through donations, rewards, loans or equity investments (Belleflamme et al., 2014; Lambert and Schwienbacher, 2010). For SEs, crowdfunding enables entrepreneurs to access relatively small contributions from a large number of individuals, bypassing traditional financial intermediaries (Mollick, 2014). The four primary models of crowdfunding – reward-, donation-, lending- and equity-based – offer diverse pathways to finance social and impact-driven ventures (Banhatti, 2016; Cosma et al., 2019).
While much of the existing literature focuses on the general relationship between crowdfunding and SEs (Banhatti, 2016; Lehner, 2016; Meyskens and Bird, 2015), equity crowdfunding remains relatively underexplored, particularly regarding its role in supporting SEs. This study seeks to address this research gap by investigating how equity crowdfunding enables SEs and impact ventures to generate positive societal impacts. Unlike prior research, which predominantly centers on the startup phase (pre-seed or seed stage), this study broadens the scope by analyzing both startups and established enterprises that use equity crowdfunding to fund growth and scale their operations.
To clarify the theoretical rationale underlying our investigation, we argue that equity crowdfunding supports SEs through two key mechanisms. First, it enables SEs to overcome funding barriers by directly accessing mission-aligned capital, thus acting as a social impact accelerator. Second, it fosters investor engagement and trust, enabling purpose-driven backers to actively support social and environmental goals. These two dimensions form the basis of our conceptual framework, which guided data collection and coding. As shown in Figure 1, we structure our analysis across three coding layers (first-order codes, second-order themes and aggregate dimensions) that empirically substantiate the theoretical pathways through which equity crowdfunding contributes to SE growth and impact.
3. Research design and methodology
The primary purpose of this study is to explore how equity crowdfunding helps SEs create positive societal impacts. We followed an exploratory and inductive research approach using a grounded theory methodology based on multiple case studies (Corbin and Strauss, 2008; Eisenhardt, 1989; Urquhart et al., 2010; Yin, 2009). Grounded theory is defined as a qualitative research approach that uses a systematic sequence of procedures to construct an inductively derived theory concerning a particular phenomenon (Strauss and Corbin, 1990, p. 24). The preference for a qualitative rather than a quantitative method was based on the former’s capability to yield valuable insights into intricate phenomena (Eisenhardt and Graebner, 2007).
We also used the multiple-case study methodology, which is considered most suitable for exploratory research (Eisenhardt, 1989; Gibbert et al., 2008), as it provides more precise, engaging and verifiable instruments (Eisenhardt and Graebner, 2007; Yin, 2009) when the goal is to establish a framework based on data analysis (Trocin et al., 2021).
According to Yin (2003), case study research allows the investigation of phenomena in their general complexity and within their natural environment. Such a feature makes this methodological approach effective for studies on an unexplored topic where the main aim is to answer research questions about the “how” and “why” of a phenomenon (Yin, 2003; Yin, 2017).
The multiple-case study design offers significant advantages, including simplifying cross-comparative analysis, which aids in identifying new variables and understanding complex processes within social contexts (Massaro et al., 2019). It also enhances the external validity of findings, broadening their generalizability and relevance to a wider range of settings (Yin, 2003). Given the alignment between our research question, objectives and these characteristics, the multiple-case study approach is considered highly suitable for this investigation. An overview of the methodological steps adopted is provided in Figure 1.
3.1 Case selection
Concerning the number of cases considered in our analysis, as explained by Eisenhardt (1991), the most appropriate number depends on what is already known and the extent to which a new case could contribute additional insights. Yin (2013) emphasizes that a multiple case study approach should adhere to a sampling logic. Selecting appropriate case studies is essential to align with the research objectives, as highlighted by Shakir (2002). This process involves ensuring the relevance and adequacy of the cases to maintain the study’s overall quality. In this research, we adopted the theoretical sampling strategy proposed by Eisenhardt and Graebner (2007), focusing on theory development rather than hypothesis testing. Cases were chosen for their richness, prioritizing their contribution to theoretical insights over their uniqueness (Eisenhardt and Graebner, 2007). Theoretical sampling, guided by conceptual considerations, aims to generate and refine theory rather than merely describe phenomena (Carè et al., 2023). As described by Glaser and Strauss (1967, p. 45), this approach involves iterative cycles of data collection, coding and analysis, with each step informing the subsequent data to be gathered. According to Strauss and Corbin (1998, p. 201), this method helps uncover variations among concepts and enrich categories in terms of their dimensions and properties. Charmaz (2006) further notes that theoretical sampling enhances analytic abstraction by identifying variations and addressing gaps that need further exploration.
The process begins with initial data collection and open coding, which generates preliminary codes that guide subsequent data collection. Glaser (1978) describes how memo-writing and constant comparison work together to refine categories, clarify their boundaries and identify gaps within the emerging theory. By comparing codes iteratively, researchers build a provisional set of conceptual categories, allowing new ones to emerge and existing ones to be enriched. The sampling process intentionally seeks both theoretical similarities and differences to fully explore the dimensions of each category, continuing until a core category is identified and saturated. At this stage, analysis and memo-writing become increasingly abstract, focusing on integrating and refining the core category and its related properties (Glaser, 1978).
The goal of theoretical sampling is to select cases that are conceptually relevant, support the development of categories and highlight extreme or varied examples within the emerging theory (Eisenhardt, 1989, p. 537). Patton (2014) notes that qualitative studies typically use small, purposefully chosen samples. In this study, a sample size of five was deemed sufficient to enable a deep investigation into the phenomenon (Eisenhardt, 1989; Yin, 1994).
Five cases were selected from SEs operating in diverse geographical areas, including France, Spain, Canada and the USA. All the selected SEs share a strong “impact orientation,” making them particularly relevant for the study’s objectives. These cases were analyzed with an explorative mindset, relying primarily on qualitative data to gain deeper insights. Table 1 provides an overview of the sample and data sources[1].
To encapsulate the diverse organizational forms represented in this study while maintaining a clear focus, we adopt the term “social enterprises” as a unifying label. This term is broadly defined to include revenue-generating organizations with a clear social or environmental mission, consistent with established literature. Specifically, the sample captures a range of organizational forms, including cooperatives (e.g. Solidarités Nouvelles pour le Logement), B-Corps (e.g. Foncière Chênelet and Impak Finance), for-profit SEs (e.g. World Tree) and mission-driven organizations holding specific accreditations, such as the SE Mark CIC (e.g. AUARA) or the Entreprise Solidaire d‘Utilité Sociale (Solidarity Enterprise of Social Utility) (ESUS) classification (e.g. Solidarités Nouvelles pour le Logement and Foncière Chênelet).
Further details are provided in Appendix 1 (sample overview), 2 (mission and current goals), 3 (value propositions and contributions to SI) and 4 (impact assessment and delivered values).
3.2 Data collection
To confirm the validity of our research process, we adopted a multisource approach, using interviews with financial directors, managers and CEOs, along with internal company documents, archival records (e.g. newspaper articles, website information and project reports) and follow-up communications for clarification (Biancone et al., 2021; Yin, 2017). An interview protocol was developed following Yin’s (2009) guidelines to standardize data collection and enhance reliability. Semi-structured interviews, conducted in June 2022, were guided by a pilot-tested questionnaire to ensure clarity and appropriate scope. Interviewees were carefully selected for their ability to provide detailed insights into equity crowdfunding and its role in fostering social impact.
To further verify the data, participants were asked to share additional internal documents and archival records whenever possible (Yin, 2009). The authors transcribed and independently analyzed all interviews. A case study database was developed to increase reliability, and final reports of the findings were shared with participants for validation.
3.3 Data analysis and coding
The analysis began with detailed descriptions of the selected cases, following Eisenhardt’s methodological guidance (1989). Each researcher independently reviewed the interview transcripts and field notes, developing an initial coding scheme based on the principles of grounded theory (Corbin and Strauss, 2008; Carè et al., 2018; Carè et al., 2023). Through an iterative coding process, first-order concepts were identified and subsequently grouped into second-order themes. These themes were further synthesized into final categories that encapsulate the role of equity crowdfunding in fostering positive societal impacts.
Methodological rigor was ensured by adhering to several key principles. Construct validity was achieved through data triangulation, leveraging diverse sources and maintaining a transparent chain of evidence (Gibbert et al., 2008; Yin, 2009). Internal validity was supported by pattern-matching techniques and cross-case comparisons to identify consistent relationships and themes across the data set (Eisenhardt, 1989; Yin, 2009). External validity was strengthened by situating the findings within their broader contextual and environmental factors, ensuring their relevance and applicability beyond the specific cases analyzed (Yin, 2003). Finally, reliability was reinforced by developing a comprehensive case study protocol and establishing a well-documented case study database, which provided a systematic foundation for the research process (Yin, 2009). Additionally, the final reports of our findings were sent to each participant for validation, further enhancing the credibility of the results.
Interview data were broken down into themes – namely, characteristics of the SEs, crowdfunding campaigns and platforms – reflecting the role of equity crowdfunding adoption as a funding strategy for social impact creation. Using the coding approach suggested by Carè et al. (2018) and Nguyen et al. (2021), we developed the scheme presented in Figure 2.
4. Case study analysis
Following the methodology outlined in the previous section, this part of the study presents an analysis based on the themes identified in Figure 2. These themes – characteristics of the SEs, the dynamics of the crowdfunding campaigns and the features of the platforms – illustrate the role of equity crowdfunding as a funding strategy for fostering social impact. The coding approach proposed by Carè et al. (2018) and Nguyen et al. (2021) was used to systematically develop and structure these thematic dimensions.
4.1 Characteristics of the social enterprises
SEs in the sample are strongly involved in SI (Table 2) and have an “impact orientation”, being able to create both environmental and social impacts.
In Table 2, the categories of impact – E1 (reduce or offset carbon emissions), E2 (reduce waste production or recycling), E3 (secure, affordable and clean energy system), S1 (action to end or mitigate poverty/target underserved communities), S2 (solution to education or unemployment issues), S3 (access to clean houses or water and sanitation), S4 (improving health conditions and/or better livelihood or quality of life), ES1 (mobilizing capital for positive impact), ES2 (creating awareness through education or advocacy), ES3 (partnering for sustainable change), ES4 (data transparency through sustainability reporting or real-time impact data) and ES5 (SI through innovative products or services for social or environmental issues) – were developed following the approach suggested by Carè et al. (2023). Specifically, the categories were adapted to reflect the unique characteristics of the cases analyzed and the thematic dimensions identified through the grounded theory methodology. Each researcher independently reviewed and coded the data, assigning the categories to specific impacts based on the evidence provided by the cases. This process ensured that both direct and indirect contributions were accurately captured. Direct contributions signify that the SE’s core activities or business model explicitly target a specific impact dimension, such as reducing carbon emissions or providing access to clean water. Indirect contributions, on the other hand, indicate a facilitative role, where the SE’s actions empower or enable other stakeholders to create positive societal or environmental outcomes. For example, SEs offering tools for sustainable investment indirectly mobilize capital for positive impact by supporting decision-making processes.
The coding process was iterative, with regular discussions between the researchers to resolve discrepancies and reach a consensus. Furthermore, the concept of mixed impact, highlighted in Table 2, captures the interplay between environmental and social dimensions. Mixed impact occurs when SEs simultaneously address environmental and social challenges, creating a synergistic effect. For instance, SEs that provide affordable, energy-efficient housing reduce carbon emissions (environmental impact) and enhance access to safe living conditions (social impact).
Furthermore, our selected sample of SEs has a mixed capital structure (debt and equity) and has also used other funding options (e.g. initial coin offerings, venture capital and angel funding) (Table 3). Equity crowdfunding can be considered an alternative funding source (or not the primary source).
Table 3 highlights that our sample has used equity crowdfunding for the pre-seed, seed, growth and maturity stages and that it has been used as a not only principal funding strategy but also complementary funding strategy (as in the case of AUARA and Impak Finance) after venture capital and business angel rounds.
Table 4 provides an overview of the funding needs and strategies of SEs in our sample.
4.2 Characteristics of the crowdfunding platforms
Previous studies have investigated the determinants of crowdfunding success (Mollick, 2014; Nguyen et al., 2021; Saluzzo and Alegre, 2021). Analyzing a sample of 335 reward-based crowdfunding projects and 33,036 investment decisions from the Spanish Goteo platform, Borrero-Domínguez et al. (2020) found that crowdfunding initiatives supporting social impact projects with an ecological focus tend to underperform. Similarly, Mollick (2014) highlighted the importance of location, showing that the proximity between funders and fundraisers increases the likelihood of fundraising success. In the context of crowdfunding platforms for social entrepreneurs, Rey-Martí et al. (2019) emphasized their role as agents of social change, using various mechanisms to promote projects that aim to generate social and/or environmental value alongside economic returns.
The investigated enterprises have raised capital through the leading platforms, La Bolsa Social and Lita.Co., FrontFundr and WeFunder. La Bolsa Social and Lita.Co. are crowdfunding platforms devoted explicitly to providing finance only to SEs or organizations with positive social and/or environmental impact. FrontFundr and WeFunder are generic crowdfunding platforms providing financial opportunities to all businesses. Table 5 provides an overview of the platforms selected by the SEs.
Both specialized and generalized platforms can support SEs in raising funds. Even if classified as “generalist,” FrontFundr and WeFunder have a strong mission to “benefit society” (Table 6).
SEs choose the platform based on the public they can reach and involve. They also consider the platform’s “social and sustainable” mission.
5. Discussion and lessons learned
Crowdfunding represents an alternative financing source for social entrepreneurs, offering unique opportunities that should be leveraged, particularly given the potential contributions of such entrepreneurial activities to SI and societal impact. The rapid growth of crowdfunding in recent years underscores the need for increased attention from policymakers. The findings are interpreted through the lens of our conceptual framework (Figure 2), which distinguishes between two core mechanisms – equity crowdfunding as a social impact accelerator and as a catalyst for impact investors – that emerged during data coding and guide our analysis of the cases. Our analysis identifies three interrelated mechanisms through which equity crowdfunding supports SEs:
the availability of alternative and mission-aligned capital;
the role of transparency in impact measurement and disclosure; and
the engagement of socially motivated investors.
These mechanisms guide the discussion that follows. This section presents a summary of the key findings discussed in the preceding sections.
5.1 Does a funding gap still exist for social enterprises that generate positive impact?
One key mechanism emerging from our analysis is the diversification of funding options, which allows SEs to overcome traditional financing barriers by accessing alternative, mission-aligned capital. This mechanism challenges the assumption of an insurmountable funding gap, showing how SEs navigate resource constraints through hybrid funding models, including equity crowdfunding.
In concrete terms, SI refers to “innovative activities and services that are motivated by the goal of meeting a social need and that are predominantly diffused through organizations whose primary purposes are social” (Mulgan, 2006, p. 146). SEs can play a prominent role in overcoming social problems and supporting sustainable development. Lumpkin et al. (2013) defined social entrepreneurship as generating social value by combining resources in novel ways to address societal needs, catalyze social transformation or establish novel organizations. According to Mair and Marti (2006), social entrepreneurs distinguish themselves from other types of entrepreneurs by prioritizing the creation of social value. Social value creation can be realized by catalyzing societal change by addressing the community’s social issues or needs. Value creation is the pivotal factor in pooling resources through innovative solutions capable of positively impacting marginalized communities (Alegre et al., 2017; Chell, 2007; Hill et al., 2010; Moss et al., 2008).
Several studies have examined how the limited array of financial support options and a lack of interest from banks have been identified as the primary barriers to the development of SEs (Pelucha et al., 2017).
Our case studies confirm that equity crowdfunding can be a viable funding option for SEs. However, they also challenge the notion that SEs are inherently limited in securing funding from alternative sources. This observation is particularly intriguing, as it prompts a reconsideration of established beliefs. Previous literature has consistently highlighted a funding gap for SEs, a gap our cases have successfully navigated by diversifying their funding sources, including venture capital, business angels and institutional investors.
This situation invites further exploration in the future, suggesting that the funding gap may be more intricately connected to the essence of their business/impact idea and the level of transparency they maintain rather than being solely determined by the availability of funding options. It raises an important question: Could there be a correlation between the clarity with which SEs can demonstrate the impact they create and the availability of funding? In other words, does enhanced clarity in presenting their impact lead to increased funding opportunities?
Investigating this potential correlation could offer valuable insights into how SEs can better position themselves to attract funding and further their societal objectives:
Lesson learned # 1: The availability of diverse funding options, including equity crowdfunding, challenges the traditional belief that SEs are limited in securing financial support. This suggests that the funding gap for SEs may be more related to the clarity of their impact presentation and level of transparency than the mere availability of funding sources. Clarifying their social impact and improving transparency can potentially enhance funding opportunities and further SEs’ societal objectives.
Our findings are confirmed by the study of Lehner and Nicholls (2017). They explain that crowdfunding can not only provide the necessary funds for SEs but also enhance their legitimacy through early societal participation and interaction. This legitimacy can be understood as a strong positive signal that enhances funding opportunities for investors. More this case study identified idiosyncratic hurdles to why an efficient social finance market has yet to be created. More precisely, research explores a framework illustrating how coordinated efforts can leverage the strengths and mitigate the weaknesses of individual participants. The study also outlines the steps required, along with the potential benefits and consequences, for stakeholders across the public, private and third sectors.
5.2 Measuring the impact created and disclosing it
Another important mechanism is transparency in impact measurement and disclosure. This mechanism plays a central role in investor trust-building and legitimacy, helping SEs attract both crowd and institutional investors by clearly communicating the value they generate.
Our cases reveal that both the crowdfunding platforms and the SEs themselves benefit from measuring and disclosing the impact they create. From the platform perspective, being transparent about the impact they facilitate or being recognized as a platform dedicated to connecting investors with companies with a clear impact orientation helps them be accountable to investors and SEs. This accountability makes them a more attractive choice for SEs looking to launch campaigns. From the SEs’ perspective, transparency appeals to the crowd of potential investors and other types of investors. However, it is important to note that impact measurement practices are still in their early stages of development. Nevertheless, they hold the potential to provide a reliable means of enhancing the role of equity crowdfunding as a funding source for social and environmentally impactful initiatives:
Lesson learned # 2: Transparency in impact measurement and disclosure is vital for both crowdfunding platforms and SEs. This transparency enhances SEs’ appeal to investors and allows platforms to build trust, ultimately bolstering equity crowdfunding’s role as a funding source for socially and environmentally impactful initiatives.
Our results align with the recent publication by Giderler and Vanclay (2024), who also emphasize the importance of both transparency and accountability in SEs. To strengthen these principles, they proposed social impact assessment as a tool to help SEs demonstrate transparency and accountability by evaluating and disclosing the positive and negative risks and impacts of their operations. This approach helps build trust among directly and indirectly affected individuals, as well as other stakeholders, including investors, employees, volunteers and the broader community.
5.3 Equity crowdfunding as a form of socially motivated investors’ catalyst
A third mechanism highlighted by our cases is the activation of socially motivated investors through equity crowdfunding. Unlike traditional finance, equity crowdfunding fosters investor engagement based on not only financial return expectations but also shared social and environmental missions.
Previous research has highlighted that SEs may not always pique the interest of traditional early-stage investors primarily focused on achieving financial returns (Banhatti, 2016; Kuppuswamy and Bayus, 2017). Examining the motivations behind social entrepreneurs turning to crowdfunding, Bergamini et al. (2017) highlighted that their primary reason is the lack of conventional funding alternatives. However, our analysis presents a more nuanced perspective, suggesting that this explanation does not hold universally true. Cases within our sample demonstrate that SEs can attract various types of investments throughout their lifecycle, such as venture capital, angel investors, institutional investors and strategic investors. Furthermore, multiple successful crowdfunding rounds within our SEs confirm their ability to establish strong relationships with their crowd investors. These investors view equity crowdfunding as a means to create long-term positive impacts on society and the environment. In such cases, investors are driven by a desire to contribute positively to society and clearly understand how their investments in SEs can generate meaningful and enduring impact. This aspect seems to be also confirmed by Hussain et al. (2023), who consider equity crowdfunding to obtain a long-term engagement with investors, thus leading to a long-term impact (p. 16):
Lesson learned # 3: SEs can attract diverse forms of investment and cultivate lasting relationships with their crowd investors, who view equity crowdfunding to create long-term positive impacts on society and the environment.
The findings align with recent perspectives shared by various researchers on the significance of equity crowdfunding as a sustainable investment avenue for impact-oriented investors (Gai et al., 2025; Vismara, 2019; Yáñez-Valdés and Guerrero, 2023). However, according to Gai et al. (2025), it is crucial for policymakers to enhance sustainability investment frameworks by enforcing stricter disclosure requirements, improving impact measurement standards and strengthening due diligence processes. More precisely, implementing standardized frameworks for reporting environmental and social impacts – particularly those aligned with regulations such as the EU Taxonomy and EU Sustainable Finance Disclosure Regulation – can help mitigate the risk of greenwashing and increase transparency. Additionally, incentive mechanisms, such as co-investment programs or tax benefits, could promote sustainable investments.
6. Conclusions, limitations and future directions
This study explored how equity crowdfunding supports SEs in generating positive societal impacts. By empirically analyzing the role of equity crowdfunding in social projects, this research highlights its potential to bridge the funding gap for SEs and foster the creation of social and environmental value.
The findings underscore several key insights. Equity crowdfunding emerges as a viable and complementary funding source, effectively challenging traditional assumptions about the funding limitations of SEs. Contrary to the prevalent notion of an insurmountable funding gap, this study demonstrates that equity crowdfunding provides SEs with access to diverse financial resources beyond conventional means. By engaging a broad spectrum of socially motivated investors, SEs can overcome barriers previously considered insurmountable, positioning themselves as attractive opportunities for funding.
This study also emphasizes the critical role of transparency in impact measurement and disclosure, which enhances trust and appeal among investors and stakeholders. SEs that clearly articulate and measure their social and environmental contributions are better positioned to secure funding from the crowd and institutional investors. Transparency fosters credibility and facilitates stronger, trust-based relationships with investors, which can lead to sustained funding opportunities and long-term support.
Additionally, this research highlights how SEs can cultivate enduring relationships with socially motivated investors through equity crowdfunding. These investors are often driven by not solely financial returns but also the desire to create lasting positive impacts on society and the environment. By aligning their missions with the values of these investors, SEs can amplify their societal and environmental contributions while fostering a more engaged and supportive investor base. The findings resonate with the theoretical premises discussed earlier, particularly the dual nature of SEs and societal impact enterprises as hybrid organizations balancing profitability and social value (Vecchi et al., 2016; Ferrarini et al., 2019). By empirically confirming that equity crowdfunding can help mitigate structural funding barriers – highlighted in the literature as a core challenge for both SEs and impact ventures (Cosma et al., 2019; Staicu, 2018) – this study reinforces the notion that alternative financial instruments can act as accelerators of SI. Moreover, the emphasis on transparency, investor trust and mission alignment aligns with existing theories positioning SEs as carriers of SI operating under resource constraints but committed to systemic change (Defourny and Nyssens, 2013; Phills et al., 2008). In this sense, equity crowdfunding is not merely a funding tool but also a governance mechanism that supports the sustainability and scalability of socially oriented business models.
The multiple case study methodology provided in-depth insights into these dynamics, emphasizing the unique ways equity crowdfunding facilitates resource acquisition for SEs. However, this methodological choice also introduces limitations. The findings are based on “analytical generalization” rather than “statistical generalization” (Elia et al., 2020; Urbinati et al., 2020; Yin, 1994) and, thus, may not fully capture the broader spectrum of SEs across different contexts.
Future research could build on these insights by exploring a larger and more diverse sample of SEs to uncover additional patterns and dynamics. Incorporating quantitative approaches would complement these findings and offer a robust validation of the qualitative insights presented in this study. Furthermore, there is significant potential to investigate the long-term sustainability and scalability of equity crowdfunding as a funding mechanism for SEs. Exploring sector-specific factors, the interplay between regional regulatory frameworks and crowdfunding effectiveness and how equity crowdfunding shapes the operational and strategic decisions of SEs over time would provide valuable contributions to this field. By addressing these aspects, future studies can offer a more comprehensive understanding of how equity crowdfunding can be optimized to support SEs in achieving their missions.
6.1 Practical implications
Building on the “lessons learned” outlined in the previous sections, this study identifies critical practical implications that emphasize the role of equity crowdfunding in supporting SEs and advancing their societal and environmental missions.
Equity crowdfunding serves as a transformative funding mechanism that complements traditional financing options. Bridging the funding gap enables SEs to access diverse funding streams and engage socially motivated investors, enhancing their capacity to generate meaningful societal and environmental value. This reinforces the observation that diversifying funding sources can strengthen SEs’ resilience and scalability.
Another important implication is transparency in impact measurement and disclosure. Communicating the societal value created allows SEs to attract investors and build trust within their ecosystems. For crowdfunding platforms, prioritizing impact-driven projects and maintaining transparency enhances their role as credible intermediaries between SEs and purpose-driven investors. These findings underscore the importance of developing and adopting standardized frameworks for impact reporting, which could significantly enhance the credibility and effectiveness of equity crowdfunding campaigns.
Policymakers also play a crucial role in maximizing the societal benefits of crowdfunding. By incentivizing transparency, fostering collaboration between platforms and SEs and creating an enabling regulatory environment, they can strengthen the ecosystem for socially impactful initiatives. Specific measures could include reducing barriers for SEs to launch campaigns and supporting platforms dedicated to social and environmental projects.
By integrating these insights, SEs, crowdfunding platforms and policymakers can collaborate to harness equity crowdfunding’s full potential and drive meaningful societal progress through innovative financial solutions.
By synthesizing the findings and positioning them within the broader academic discourse, this study offers three main contributions. First, it enhances theoretical understanding by illustrating how equity crowdfunding enables SEs to generate social and environmental value through mechanisms rooted in transparency, trust and mission alignment. Second, it provides a methodological contribution by applying a grounded theory approach to an area that remains underexplored, thereby yielding empirically grounded insights. Third, it delivers practical guidance for social entrepreneurs and crowdfunding platforms, underscoring the importance of impact communication and values-based investor engagement in securing funding and amplifying societal benefits. These contributions complement the identified literature gaps and aim to encourage further research on the financial and strategic dimensions of SEs.
Note
The information reported and analyzed in this article was collected between May and July 2022 through interviews, documentation provided by participants, and publicly available sources. Participants were given the opportunity to review and validate the collected data, ensuring the accuracy and completeness of the information used in the case study analyses.
Funding: This project has received funding from the European Union’s Horizon 2020 research and innovation program under the Marie Skłodowska-Curie grant agreement number 892293.
CRediT author statement: Rosella Carè: Conceptualization, Methodology, Formal analysis, Investigation, Validation, Writing – original draft, Writing – review & editing, Supervision, Project administration, Funding acquisition.
Rabia Fatima: Data collection, Data visualization.
Stella Carè: Data collection.
