Crowdfunding, Efficiency, and Inequality

Grüner, Hans Peter; Siemroth, Christoph

doi:10.1093/jeea/jvy023

Cited by 21 publications

(9 citation statements)

References 31 publications

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“…Crowd participation in an ECF campaign can provide important insights into the quality and ultimate success of the startup (Ahlers et al, ; Hornuf & Schwienbacher, ). Grüner and Siemroth () develop a theoretical model where consumers have private consumption preferences and might invest in an ECF campaign. Based on their preferences, future consumers become investors, identify worthwhile ECF campaigns, and fund the firms they like.…”

Section: Theory and Hypothesesmentioning

confidence: 99%

Equity crowdfunding in Germany and the United Kingdom: Follow‐up funding and firm failure

Hornuf

Schmitt

Stenzhorn

2018

Corporate Governance

118

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Manuscript type Empirical Research question/issue Today, startups frequently obtain financing via the Internet through many small contributions of nonsophisticated investors. Yet, little is known whether these startups can ultimately build enduring businesses. This study investigates the determinants of follow‐up funding and firm failure after an equity crowdfunding campaign has taken place. Research findings/insights We use hand‐collected 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. Our findings show that German firms that received equity crowdfunding stood a higher chance of obtaining follow‐up funding through business angels or venture capitalists but also had a higher likelihood of failure. The number of senior managers and the number of initial venture capital investors both had a positive impact on obtaining postcampaign financing, whereas the average age of the senior management team had a negative impact. The number of initial venture capital investors and the valuation of the firm were significant predictors increasing the hazard of firm failure, whereas the number of senior managers and the amount raised during previous equity crowdfunding campaigns had a negative impact. Theoretical/academic implications This study provides some first empirical evidence regarding the firm and campaign characteristics that determine follow‐up funding and firm failure after an equity crowdfunding campaign has taken place. Given the absence of research on this topic so far, this study inevitably remains original and exploratory to some extent. The empirical findings suggest various avenues of research for human capital theory, organizational ecology, and the comparative corporate governance literature. Practitioner/policy implications Identifying influencing factors of follow‐up funding and firm survival is important to make this new and potentially welfare enhancing form of entrepreneurial finance more predictable by decreasing the risk of individual investments. Furthermore, this study offers insights to policy makers, which are currently expected to implement appropriate regulations for this new market segment. In addition, it provides important insights for portal managers as well as firms raising capital via equity crowdfunding, which may learn about their chances to build an enduring business. https://youtu.be/w_4lIfnOaQY

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Section: Theory and Hypothesesmentioning

confidence: 99%

Equity crowdfunding in Germany and the United Kingdom: Follow‐up funding and firm failure

Hornuf

Schmitt

Stenzhorn

2018

Corporate Governance

118

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“…Lee and Persson (2016) also highlights the importance of informal financing and donations in a more classic investment setup. Other recent equity crowdfunding work include Grüner and Siemroth (2017), Abrams (2017), and Li (2017). Equity crowdfunding is closer to an investment game rather than a contribution game.…”

Section: Literature On Crowdfundingmentioning

confidence: 99%

Aiming for the Goal: Contribution Dynamics of Crowdfunding

Deb¹,

Oery²,

Williams³

2018

SSRN Journal

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We study reward-based crowdfunding campaigns, a new class of dynamic contribution games where consumption is exclusive. Two types of backers participate: buyers want to consume the product while donors just want the campaign to succeed. The key tension is one of coordination between buyers, instead of free-riding. Donors can alleviate this coordination risk. We analyze a dynamic model of crowdfunding and demonstrate that its predictions are consistent with high-frequency data collected from Kickstarter. We compare the Kickstarter mechanism to alternative platform designs and evaluate the value of dynamically arriving information. We extend the model to incorporate social learning about quality.

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“…People are satisfied by contributing to projects that make an impact, have social merit, and generate macro-economic implications in terms of income redistribution (Grüner and Siemroth, 2019). In this sense, we argue that the pledgers disregard self-benefit and prefer social benefits, contributing to higher rates for social projects, rather than other project types such as art, and they do so even more intensively in cities with higher income inequalities.…”

Section: Introductionmentioning

confidence: 81%

“…They provide evidence that financial inclusion is a key channel through which FinTechs reduce income inequality. Grüner and Siemroth (2019) have shown that decentralized individual investments can efficiently allocate capital to innovating firms via crowdfunding. Furthermore, Kimura et al (2018) have argued that a local disparity in income distribution can encourage pledgers to donate money.…”

Section: H3mentioning

confidence: 99%

Reward crowdfunding campaigns: Time-to-success analysis

Felipe

Mendes‐Da‐Silva

Leal

et al. 2022

Journal of Business Research

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The time-to-success of reward crowdfunding campaigns constitutes a relevant topic that has been neglected in business literature. In this study, we employ parametric and semi-parametric models of survival analysis to identify the determining factors of the duration of success of these campaigns. Based on more than 4,200 reward crowdfunding campaigns, our results are robust for controls and reveal that the campaigns that attain success most rapidly are located predominantly in cities with greater income inequality. These are cities that are characterized by lower fundraising targets and receive a larger number of pledges. In addition, our covariates indicate a non-constant influence on time-to-success during the fundraising period.

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Crowdfunding, Efficiency, and Inequality

Cited by 21 publications

References 31 publications

Equity crowdfunding in Germany and the United Kingdom: Follow‐up funding and firm failure

Equity crowdfunding in Germany and the United Kingdom: Follow‐up funding and firm failure

Aiming for the Goal: Contribution Dynamics of Crowdfunding

Reward crowdfunding campaigns: Time-to-success analysis

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