From Digitalisation to Artificial Intelligence: The New Frontiers of Entrepreneurial Finance

Digitalization and Artificial Intelligence (AI) are driving entrepreneurial finance into new frontiers. This manuscript delineates pivotal innovations with transformative implications for access to financing. We focus on the ascent of financial technology (fintech) to shed light on how AI-based startups are financed, with a specific focus on innovative financing channels like equity crowdfunding and initial coin offerings. Our findings reveal that, along with traditional finance, AI-based startups increasingly rely on alternative financing instruments. We document that digital finance provides a valuable source of financing for AI-based startups, especially where the traditional equity market is less developed. At the geographic regional level, the number of digital financing rounds is negatively correlated with the equity market development. For instance, while the United States leads the ranking of private and venture capital investments in AI-based companies, the European Union has the largest number of equity crowdfunding and initial coin offering rounds.