On the Road to Success in Equity Crowdfunding

Ralcheva, Aleksandrina; Roosenboom, Peter

doi:10.2139/ssrn.2727742

Cited by 78 publications

(110 citation statements)

References 27 publications

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“…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…”

Section: Data Sourcesmentioning

confidence: 99%

Which updates during an equity crowdfunding campaign increase crowd participation?

2017

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Start-ups often post updates during equity crowdfunding campaigns. However, little is known about the effects of such updates on crowd participation. We investigate this question by using hand-collected data from 71 funding campaigns and 39,399 investment decisions on two German equity crowdfunding portals. Using a combination of different empirical research techniques, we find that posting an update has a significant positive effect on the number of investments made by the crowd and the investment amount collected by the start-up. This effect does not occur immediately in its entirety; rather, it lags the update by a few days. Furthermore, the effect of updates loses statistical significance with the number of updates posted during a campaign. We also find that an easier language used in updates increases crowd participation, whereas the length of updates has no effects. With respect to the update's content, we find that the positive effect can be attributed to updates about new developments of the start-up such as campaign developments, new funding, business developments, and cooperation projects. Updates on the start-up team, business model, product developments, and promotional campaigns do not have meaningful effects. Our paper contributes to the literature on the effects of information disclosure on equity crowdfunding participation. Furthermore, our results have practical implications for start-ups and their investor communication during equity crowdfunding campaigns.

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Section: Data Sourcesmentioning

confidence: 99%

Which updates during an equity crowdfunding campaign increase crowd participation?

2017

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“…The United Kingdom accounted for nearly 40% of the global equity crowdfunding market in 2016. Hence, this setting provides us with sufficient firms that raised equity crowdfunding (e.g., Harrison, 2013;Ralcheva & Roosenboom, 2016;Signori & Vismara, 2018;Vismara, 2016Vismara, , 2018Vulkan et al, 2016;Walthoff-Borm, Schwienbacher, & Vanacker, 2018). Moreover, the United Kingdom has established equity crowdfunding platforms that operate through a direct shareholder structure, a nominee structure, or a combination of both.…”

Section: Equity Crowdfunding and Shareholder Rights In The United Kmentioning

confidence: 99%

Equity crowdfunding, shareholder structures, and firm performance

Walthoff-Borm

Vanacker

Collewaert

2018

Corporate Governance

120

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Research question/issue This paper provides a first‐time glimpse into the postcampaign financial and innovative performance of equity‐crowdfunded (ECF) and matched nonequity‐crowdfunded (NECF) firms. We further investigate how direct and nominee shareholder structures in ECF firms are associated with firm performance. Research findings/insights We find that ECF firms have 8.5 times higher failure rates than matched NECF firms. However, 3.4 times more ECF firms have patent applications than matched NECF firms. Within the group of ECF firms, we find that ECF firms financed through a nominee structure make smaller losses, whereas ECF firms financed through a direct shareholder structure have more new patent applications, including foreign patent applications. Theoretical/academic implications Our findings suggest that there are important adverse selection issues on equity crowdfunding platforms, although these platforms also serve as a catalyst for innovative activities. Moreover, our findings suggest that there is a more complex relationship between dispersed versus concentrated crowd shareholders and firm performance than currently assumed in the literature. Practitioner/policy implications For policy makers and crowdfunding platforms, investor protection against adverse selection will be important to ensure the sustainability of equity crowdfunding markets. For entrepreneurs and crowd investors, our study highlights how equity crowdfunding and the adopted shareholder structure relate to short‐term firm performance.

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“…To date, research has focused upon the rewards-based model synonymous with the US firm Kickstarter and donation crowdfunding (Gerber et al, 2012;Colombo et al, 2015;Mollick, 2014;Giudici et al, 2017) 1 , however the concept has rapidly expanded both in terms of format and geography (Hemer, 2011;World Bank, 2013;Lin and Viswanathan, 2015;Short et al, 2017). In recent years increasing academic interest is being shown in equity crowdfunding -a prominent source of finance for nascent entrepreneurial ventures (Collins and Pierrakis, 2012;Ralcheva and Roosenboom, 2016;Vismara, 2016b;Block et al, 2016;Vulkan et al, 2016) originally rather narrowly defined as "a model in which crowdfunders receive a financial compensation" (Belleflamme et al, 2014, p. 317). Ahlers et al (2015, p. 958) offer a more permissive definition of crowdfunding as "a method of financing, whereby an entrepreneur sells a specified amount of equity or bond-like shares in a company to a group of (small) investors through an open call for funding on Internet-based platforms".…”

Section: Introductionmentioning

confidence: 99%

Working the crowd: Improvisational entrepreneurship and equity crowdfunding in nascent entrepreneurial ventures

Brown

Mawson

Rowe

et al. 2017

International Small Business Journal

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Equity crowdfunding has rapidly established itself as an important part of the funding landscape for nascent entrepreneurial ventures. To date, however, little is known about the nature of the demand for equity crowdfunding or its impact on recipient firms. This paper draws on an interview-based study of entrepreneurs in 42 equity crowdfunded start-ups in the UK. The study found strong demand for this funding from these experimental and improvisational entrepreneurs within innovative, consumer-focused, early stage firms. Many entrepreneurs were classic "discouraged borrowers" attracted by the ability to obtain finance quickly with relatively little diminution of their equity or autonomy. In terms of impact, equity crowdfunding seems to confer important intangible benefits to investee companies which amount to more than money. Given their strongly improvisational nature, the concept of entrepreneurial bricolage seems a suitable theoretical lens explicating the behavioural aspects of the entrepreneurs examined.

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On the Road to Success in Equity Crowdfunding

Cited by 78 publications

References 27 publications

Which updates during an equity crowdfunding campaign increase crowd participation?

Which updates during an equity crowdfunding campaign increase crowd participation?

Equity crowdfunding, shareholder structures, and firm performance

Working the crowd: Improvisational entrepreneurship and equity crowdfunding in nascent entrepreneurial ventures

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