Equity crowdfunding: A new phenomena

Abstract

Crowdfunding has recently become available for entrepreneurs. Most academic studies analyse data from rewards-based (pre-selling) campaigns. In contrast, in this paper we analyse 636 campaigns, encompassing 17,188 investors and 64,831 investments between 2012 and 2015, from one of the leading European equity crowdfunding platforms. We provide descriptive statistics and carry out cross-campaign regression analysis. The descriptive statistics address its size, growth and geographic distributions in the UK. The regressions analyse which factors are associated with the probability of a successful campaign. We find some similarities and some interesting dissimilarities when comparing the descriptive statistics and regression results to research on rewards-based crowding. The data show that equity crowdfunding will likely pose great challenges to VC and business angel financiers in the near future. We discuss some research challenges and opportunities with these kind of data.

Which updates during an equity crowdfunding campaign increase crowd participation?

“…However, it needs to be considered that investors' motivations have been shown to depend on the specific crowdfunding model (Cholakova and Clarysse 2015;Lukkarinen et al 2016;Vulkan et al 2016;Polzin et al 2017), which suggests that the effects of updates and the signals used also differ according to the crowdfunding model. Focusing on findings in relation to venture financing with a profit participation of investors, the content of these signals can be roughly summarized into information about the start-up's quality (i.e., the management team, its preparedness and openness, and the start-up's financials) and external credentials provided by third parties (i.e., through social networks, reputable investors, protection of intellectual property, reception of grants, and the reaction by the crowd).…”

“…Furthermore, Aoterra, (2015), Lukkarinen et al (2016), Polzin et al (2017) Share of retained equity Mixed Entrepreneurial intention Ahlers et al (2015), Ralcheva and Roosenboom (2016), Vismara (2016a) External certification Social network (size) Mixed Social capital; quality disclosure; larger investor base Ahlers et al (2015), Lukkarinen et al (2016), Vismara (2016a) Reputable investors (business angels, experts) + Quality disclosure; certification Kim and Viswanathan (2013), Ralcheva and Roosenboom (2016) Investors with large investments + Quality disclosure Vulkan et al (2016) Intellectual capital (patents) Mixed Quality disclosure Ahlers et al (2015), Ralcheva and Roosenboom (2016) Reception of grants None Quality disclosure Ralcheva and Roosenboom (2016) Campaign developments…”

“…Funds already raised + Social capital; observational learning Agrawal et al (2015), Vulkan et al (2016) Number of capital providers + Social capital; observational learning…”

Equity crowdfunding, shareholder structures, and firm performance

“…In line with the increasing popularity of crowdfunding, scholarly research has followed suit with early research mainly focusing on (a) identifying success factors in raising different types of crowdfunding and (b) funding dynamics on crowdfunding platforms (e.g., Ahlers, Cumming, Günther, & Schweizer, ; Allison, Davis, Short, & Webb, ; Allison, Davis, Webb, & Short, ; Block et al, ; Butticè, Colombo, & Wright, ; Chan & Parhankangas, ; Colombo, Franzoni, & Rossi‐Lamastra, ; Courtney, Dutta, & Li, ; Davis, Hmieleski, Webb, & Coombs, ; Giudici, Guerini, & Rossi‐Lamastra, ; Mollick, ; Vismara, , ; Vulkan, Åstebro, & Sierra, ). Scholars have also started exploring postcampaign outcomes, with a primary focus on the follow‐on funding and survival of projects funded through reward‐based crowdfunding platforms (e.g., Butticè et al, ; Colombo & Shafi, ; Mollick, ; Mollick & Kuppuswamy, ).…”

A research note on entrepreneurs’ financial commitment and crowdfunding success

“…In recent years, equity crowdfunding or crowdinvesting, respectively, has become a popular way to finance new and emerging ventures (Ahlers et al 2015;Vulkan, Åstebro, and Sierra 2016). Evidently, however, the equity crowdfunding market is unique in various ways compared to traditional ways of funding: While it enables entrepreneurs to publish open-calls for funding in exchange for equity or equity-like shares, equity crowdfunding does not only address single investors but a magnitude of small investors who might want to participate in the growth of primarily young businesses (Bradford 2012;Belleflamme, Lambert, and Schwienbacher 2014).…”