Equity Crowdfunding in Germany and the UK: Follow-Up Funding and Firm Survival

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Today, start-ups often obtain financing via the Internet through many small contributions of non-sophisticated investors. Yet little is known about whether these start-ups can ultimately build enduring businesses. In this paper, we hand-collected data from 38 different equity crowdfunding (ECF) portals and 656 firms that ran at least one successful ECF campaign in Germany or the United Kingdom. The evidence shows that German firms that receive ECF stand a higher chance of obtaining follow-up funding through business angels or venture capitalists and have a relatively lower likelihood to survive. We find firm age, the average age of the management team, and excessive funding during the ECF campaign all have a negative effect on firms' likelihood to obtain post-campaign financing. By contrast, the number of senior managers, registered trademarks, subsequent successful ECF campaigns, crowd exits, and the amount of the funding target all have a positive impact. Subsequent successful ECF campaigns, crowd exits, and the number of venture capital investors are significant predictors reducing firm failure. Finally, we find that some of these factors have a differential impact for Germany and the United Kingdom. Terms of use: Documents inJEL-Codes: G240, M130.

New methods of entrepreneurial firm financing: Fintech, crowdfunding and corporate governance implications

“…In a similar vein, Hornuf, Schmitt, and Stenzhorn () investigate the determinants of follow‐up funding and firm failure after an equity crowdfunding campaign has taken place. They use data from 13 different equity crowdfunding portals and 413 firms that ran at least one successful equity crowdfunding campaign in Germany or the United Kingdom between 2011 and 2016.…”

Equity crowdfunding, shareholder structures, and firm performance

“…Few studies, however, have focused on the outcomes of firms funded through equity crowdfunding, which is fundamentally different from reward‐based crowdfunding (Vismara, ). Notable exceptions include Drover, Wood, and Zacharakis (); Hornuf and Schmitt (); and Signori and Vismara (). In particular, these studies have examined follow‐on fundraising, failures, and exits .…”

“…Drover et al () use experimental data to investigate how different forms of crowdfunding influence venture capitalist's screening decisions; Hornuf and Schmitt () examine failure rates of equity crowdfunded firms in Germany and the United Kingdom; Signori and Vismara () focus on failures, follow‐on financing, and M&A exits in equity crowdfunding.…”

Crowdfunded and then? The role of intellectual capital in the growth of equity-crowdfunded companies

“…The third contribution, authored by Hornuf et al (2018), explored ECFed companies that successfully concluded their campaigns on 14 different ECF platforms in UK and Germany.…”

“…Thus, a relevant gap emerges from a review of dedicated literature. Up to now, in fact, only few scholars have investigated the post-campaign scenarios of ECFed companies by focussing their attention on the survival rate of ECFed companies and on the possibility for these companies to get following funding rounds (Di Pietro et al, 2018;Hornuf et al, 2018;Signori and Vismara, 2018;Walthoff-Borm et al, 2018) or create innovation/ growth opportunities (Eldridge et al, 2019). To the best of our knowledge, there are no studies that have investigated the post-birth growth capabilities of ECFed companies andin particularhow intellectual capital (IC) influences company growth.…”