Does Crowdfunding Benefit Entrepreneurs and Venture Capital Investors?

Babich, Volodymyr; Marinesi, Simone; Tsoukalas, Gerry

doi:10.2139/ssrn.2971685

Cited by 36 publications

(38 citation statements)

References 27 publications

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“…Otherwise, the campaign fails and funders are refunded. Successful crowdfunding before tapping other financiers is critical to venture success, as it signals public interest, provides early feedback on venture quality as well as customer preferences, and raises capital entrepreneurs can only access after funding goals are met (Babich et al 2018). Hence, understanding funders' behavior is a crucial success factor for entrepreneurs.…”

Section: Introductionmentioning

confidence: 99%

Observational learning and willingness to pay in equity crowdfunding

Walther

Bade

2020

Bus Res

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This study examines interdependencies between investments of equity crowdfunders. Based on hand-collected data from a well-established equitycrowdfunding platform, we find strong indication that investors observe previous investments to determine their willingness to pay for equity shares. Furthermore, the investment behavior of predecessors may lead investors to deviate from average investment behavior. In particular, investors are willing to pay more than the average investment, when the focal campaign is hot or there have been many large investments in the campaign. Remarkably, a high number of all previous investments over the entire period of the campaign as well as co-financing by presumably sophisticated investors negatively influence willingness to pay. This suggests that crowd investors are subject to partial crowding-out. These findings are different on the platform level, which suggests that investors' behavior is rather information than sentiment-driven.

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Section: Introductionmentioning

confidence: 99%

Observational learning and willingness to pay in equity crowdfunding

Walther

Bade

2020

Bus Res

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“…Babich et al (2017) describe a Kickstarter campaign for "C.H.I.P. The World's First Nine Dollar Computer."…”

Section: Start-ups Entrepreneurship and Financingmentioning

confidence: 99%

“…Crowdfunding is another option of raising capital, complementing traditional sources (such as borrowing from friends and family), securing small bank loans, soliciting angel investors, pitching ideas to venture capitalists (VCs), and using trade credit. Interestingly, Babich et al (2017) show that crowdfunding alters interactions between the entrepreneur and the traditional financing sources, such as banks and VCs. Babich et al (2017) predict (and this has been confirmed empirically) that, surprisingly, a successful crowdfunding campaign may result in a loss of VC financing.…”

Section: Start-ups Entrepreneurship and Financingmentioning

confidence: 99%

“…Interestingly, Babich et al (2017) show that crowdfunding alters interactions between the entrepreneur and the traditional financing sources, such as banks and VCs. Babich et al (2017) predict (and this has been confirmed empirically) that, surprisingly, a successful crowdfunding campaign may result in a loss of VC financing.…”

Section: Start-ups Entrepreneurship and Financingmentioning

confidence: 99%

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Introduction to the Special Issue on Research at the Interface of Finance, Operations, and Risk Management (iFORM): Recent Contributions and Future Directions

Babich

Kouvelis

2018

M&SOM

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Abstract. Interface of finance, operations, and risk management (iFORM) is a relatively new research area dealing with timely, complex, and boundary-spanning issues in a variety of settings from start-ups to global enterprises. iFORM research addresses ways to better integrate physical, financial, and informational flows by combining the operational choices of the firm with its financial decisions, and merging information flows between the firm and its customers and suppliers with informational flows between the firm and its investors. We report on the main research themes of the recent iFORM research, based on, and going beyond, papers that appeared in the Manufacturing and Service Operations Management iFORM special issue. We highlight the main emerging contributions in the area. Among the most frequently addressed issues in current research include the following: supply chain finance, such as trade credit and buyer-intermediated finance and their effects on supply chain performance; agency problems, such as risk shifting and managerial short-termism and their influence on operational decisions; contracting between the firm and its investors and how it alters contracting with supply chain partners; and supply risk management in the form of dealing with commodity price fluctuations and supplier performance issues. We suggest four promising directions of future iFORM research: supply chain finance, integrated risk management, start-up and entrepreneurial financing, and asset pricing with supply chains.

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“…Research on this topic is scarce, and a certain level of controversy remains over whether crowdfunding complements or competes with other sources of entrepreneurial finance. Some suggest that receiving equity crowdfunding and along with it a 'crowd of shareholders' might deter subsequent investment from accredited investors (Babich et al, 2018). However, it also seems likely that crowdfunding enables entrepreneurs to raise smaller sums at earlier stages of their development, especially when venture capitalists, business angels and banks show decreasing interest in screening smaller deals and funding nascent ventures (Clark, 2014;Mason et al, 2016;Schwienbacher and Larralde, 2012;Tomczak and Brem, 2013).…”

Section: How Crowdfunding Work: the Actors On A Crowdfunding Scenementioning

confidence: 99%