Forecasting Success in Equity Crowdfunding

Ralcheva, Aleksandrina; Roosenboom, Peter

doi:10.2139/ssrn.3260140

Cited by 26 publications

(59 citation statements)

References 36 publications

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“…Research on equity crowdfunding has explored the host of signals employed by ventures that make them more successful in fundraising. These signals include the number and human capital of board members (Ahlers et al, 2015), entrepreneurs' business education and their experience (Piva and Rossi-Lamastra, 2018), retained equity by entrepreneurs (Vismara, 2016a), and receipt of prior external funding (Lukkarinen, Teich, Wallenius, and Wallenius, 2016;Kleinert, Volkmann, and Grünhagen, 2018;Ralcheva and Roosenboom, 2018). We extend this line of inquiry by focusing on the intermediary role of crowdfunding platforms, and argue that their actions can reinforce crowd investors' perception of ventures' signals.…”

Section: Introductionmentioning

confidence: 89%

“…As was mentioned earlier, ventures' VC-backing is a prominent signal of their quality. Previous studies in crowdfunding show that crowd investors positively value that the venture has previously obtained funding from VCs (Lukkarinen et al, 2016;Vismara, 2016b;Ralcheva and Roosenboom, 2019;Colombo and Shafi, 2019;Mamonov and Malaga, 2019;Kleinert, Volkmann, and Grünhagen, 2020). Therefore, we refrain from specifying a formal hypothesis on the positive relationship between a focal venture's previous backing by VCs and the outcomes of its equity crowdfunding campaign.…”

Section: Ventures' Previous Fundraising From Professional Investors Amentioning

confidence: 99%

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A Theory of Sequential-Stage Signaling: Evidence from Equity-Crowdfunding

Shafi¹,

Colombo²

2020

Preprint

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We develop a theory of sequential-stage signaling that addresses how issuers’ signals are perceived by the receivers when there is an intermediary that facilitates the transaction and the intermediary’s incentives may not be aligned with those of signal receivers. We propose that boundedly-rational receivers may misinterpret costly signals indicating issuers’ underlying quality and consider signals revealing intermediary’s private information on issuers’ quality to be more informative. We apply the theory to the context of equity crowdfunding oﬀerings in the U.S. While the signal from ventures’ backing by professional investors is associated with more positive outcomes of the crowdfunding campaigns, our ﬁndings show that this eﬀect is mediated by the equity stake requested by the crowdfunding platforms as compensation for their services. The platforms’ "skin in the game" sends an additional easily-interpretable signal to crowd investors on venture quality.

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Section: Introductionmentioning

confidence: 89%

Section: Ventures' Previous Fundraising From Professional Investors Amentioning

confidence: 99%

A Theory of Sequential-Stage Signaling: Evidence from Equity-Crowdfunding

Shafi¹,

Colombo²

2020

Preprint

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“…Prior research focusing on the determinants of equity crowdfunding successful campaigns points out that equity offered [1,3,4,18,22,23], and social capital [1,6,16,17,23] are the main uncontroversial key factors driving potential investors to finance equity crowdfunding projects. So, in order to take into account these features, we also include as our key independent variables the percentage of equity offered to investors (equity offered) reported in each offering, and the social capital of the founders (social capital), captured as the sum of Facebook likes, LinkedIn connections and Twitter followers [5,11].…”

Section: Variablesmentioning

confidence: 99%

“…In order to test our first hypothesis (H.1) we build two interaction terms (equity offered_covid and social capital_covid) between the dummy covid and our two key variables that impact on the success of an equity crowdfunding campaign, that is equity offered [1,18,23] , and social capital [1,16,23]. We do not include the value of the covid variable standing alone, since its effect would be not distinguishable from other factors that are country-specific and time-variant.…”

Section: Shs Web Of Conferences 9 2 010 (2021) Globalization and Itsmentioning

confidence: 99%

Sustainable Equity Crowdfunding Projects: Are They A Driving Force to Revitalise Italy After Global Socio-Economic Consequences of The COVID-19?

Manganiello

Drăgulănescu

2021

SHS Web of Conf.

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Research background: The outbreak of COVID-19 has disrupted and shaken all economic and financial sectors. In this scenario, crowdfunding has emerged as a new relevant financing mechanism alongside more traditional funding channels by attracting investors through an internet-based method of fundraising to support ventures. In recent years, many crowdfunding platforms, specialized in green projects rose, allowing start-ups to raise funds for their campaigns. The literature on the use of crowdfunding in the sustainable sector is quite limited. Purpose of the article: We use a hand-collected dataset of 350 equity crowdfunding campaigns, gathered from the Italian platforms over the period January 2016-June 2020, to analyze the impact of COVID-19 outbreak on the success of green equity crowdfunding projects. We also test the greater attractiveness of the projects sustainability-oriented than other types of campaigns and if growth in the number of “green” projects is linked to the increase of local environmental performance. Methods: We measure the probability of success of pitched projects, both in terms of the total amount raised and the number of investors. We run a negative-binomial-regression for the number of investors and a Tobit-regression for the amount of capital raised. Findings & Value added: Coherently with our hypotheses, we find that COVID-19 has reduced the probability of success and that campaigns with a sustainability orientation are more likely to reach the funding target because investors give more importance to a sustainable future. Finally, our search provides that the leading countries in environmental performance have a positive effect on the green crowdfunding projects, by aspiring to move toward a sustainable future.

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“…Zhang et al (2017) were studying investor behavior when investing at peer-to-peer platforms. Motylska-Kuzma (2018), Ralcheva et al (2019) were analyzing the factors determining success in financing crowdfunding projects. Gavurova et al (2018) were examining the decision-making process exercised by investors having regard to the investment objects at the peerto-peer platforms and their specific characteristics.…”

mentioning

confidence: 99%

Financial Innovation Management: Loan Price in the Crowdfunding and Peer-To-Peer Lending Platforms

Keliuotytė-Staniulėnienė

Kukarėnaitė

2020

MMI

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As an alternative to traditional bank financing, companies (especially small and medium-sized) can opt for loans from innovative financial facilities: peer-to-peer lending and crowdfunding platforms. When using these alternative financing opportunities, it is very important to identify the main factors of the business loan interest rate and properly assess the overall cost of borrowing. This paper summarizes the scientific discussion on the issue of innovative business funding sources and one of the most important ratios referred to reasonably compare the price of financing sources and the related expenses. Therefore, the main purpose of this research is to identify the internal and external factors of interest rate on business loans and determine the overall total annual rate of charge for business loans on innovative financing platforms. After the analysis of academic literature and statistical data of crowdfunding and peer-to-peer lending market, the authors used the methods of correlation-regression and factor analysis to identify the factors that determine the interest rate of business loans on crowdfunding and peer-to-peer platforms; and scenario analysis to evaluate the total annual rate of charge for business loans. According to the results of correlation-regression and factor analysis, the summarized factors of business loan interest rate are economic environment, competitive environment, and results of the platform performance. External factors appeared to have a much greater impact on the interest rate for business loans in crowdfunding and peer-to-peer lending platforms than internal. The assessment of the total annual rate of charge for business loans confirmed that the peer-to-peer and crowdfunding platforms offer a lower rate than traditional financing institutions, on the other hand, the total rate at the crowdfunding platforms is higher compared to peer-to-peer lending platforms, due to the higher administrative fees and interest rates. The outcomes of this research expanded the scope of research on the sector of financial innovation. The research revealed the peculiarities of crowdfunding and peer-to-peer lending, the factors that affect a loan interest rate, and the real price that business owners have to pay for borrowed funds. Obtained results could be relevant to both lending platforms and businesses seeking to identify and compare the real cost of traditional and alternative financing. Keywords: financial innovation, alternative financing, financial technologies, factors of interest rate, price of borrowing, the total annual rate of charge for business loans.

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Forecasting Success in Equity Crowdfunding

Cited by 26 publications

References 36 publications

A Theory of Sequential-Stage Signaling: Evidence from Equity-Crowdfunding

A Theory of Sequential-Stage Signaling: Evidence from Equity-Crowdfunding

Sustainable Equity Crowdfunding Projects: Are They A Driving Force to Revitalise Italy After Global Socio-Economic Consequences of The COVID-19?

Financial Innovation Management: Loan Price in the Crowdfunding and Peer-To-Peer Lending Platforms

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