New Technology Assessment in Entrepreneurial Financing - Can Crowdfunding Predict Venture Capital Investments?

Kaminski, Jermain; Hopp, Christian; Tykvová, Tereza

doi:10.2139/ssrn.2829777

Cited by 10 publications

(7 citation statements)

References 82 publications

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“…This literature evidences that successful crowdfunding allows for certification effects and thus positively influences the decision of a VC to fund the startup. Kaminski, Hopp, and Tykvova () show that reward‐based crowdfunding campaigns lead to subsequent VC investments. Colombo and Shafi () provide evidence that firms with external financing before their crowdfunding campaign receive follow‐up funding even when they perform badly and deliver their product late.…”

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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“…We believe there are several mechanisms that may influence the reputation of VC investors that companies are able to attract after an equity crowdfunding campaign. On the one hand, having raised financing through equity crowdfunding enhances the firm visibility in the entrepreneurial finance market, making VCs more aware of the startup itself (e.g., Kaminski et al, 2019). Moreover, a successful equity crowdfunding campaign signals a positive appreciation of the startup (and the product) from the crowd.…”

Section: Theoretical Backgroundmentioning

confidence: 99%

They do not look alike: what kind of private investors do equity crowdfunded firms attract?

2021

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Using a dataset of 170 firms that successfully fundraised via the two most prominent UK equity crowdfunding platforms, we investigate whether and how having successfully run an equity crowdfunding campaign is associated to the reputation of follow-on venture capital investors attracted. From the comparison with a control group of firms that received a seed round from business angels, we found that firms that have run a successful equity crowdfunding campaign attract lower reputable VCs. These results are confirmed when controlling for endogeneity and for firms’ characteristics. Considering the shareholder structure chosen by the firm raising equity crowdfunding, we found that firms opting for a direct shareholder structure, which entails higher coordination and agency costs, attract less reputable VCs compared to firms opting for the nominee shareholder structure.

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“…There are also other works by the same authors, such as a study that seeks to exploit the information in Crunchbase on the location of company headquarters and their sector of activity (Berchicci et al, 2011). Several very recent papers have further been written by authors who are likely to target the same group of journals (Hallen et al, 2017;Huang and M. Z. Shi, 2015;Huang and Z. Shi, 2016;Howell, 2017;Kaminski et al, 2016;Dams et al, 2016, for instance), while some other works seem to be thematically very close (Bradic, 2012;Wang, 2016).…”

Section: Non-journal Literaturementioning

confidence: 99%

“…Related to the fourth group, with its focus on business angels, we could add, thus extending its scope, research on venture capital more in general (Cumming et al, 2014;Nuscheler, 2016), research on crowdfunding (McGuire, 2017;Cheng et al, 2016;Kaminski et al, 2016), and research on accelerators (den Besten and Dalle, 2015; S. W. Smith and Hannigan, 2015;Perotti and Yu, 2015;Dams et al, 2016).…”

Section: Non-journal Literaturementioning

confidence: 99%

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Using Crunchbase for economic and managerial research

Dalle¹,

Besten²,

Menon

2017

OECD Science, Technology and Industry Working Papers

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OECD Working Papers should not be reported as representing the official views of the OECD or of its member countries. The opinions expressed and arguments employed are those of the author(s). Working Papers describe preliminary results or research in progress by the author(s) and are published to stimulate discussion on a broad range of issues on which the OECD works. Comments on Working Papers are welcomed, and may be sent to

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New Technology Assessment in Entrepreneurial Financing - Can Crowdfunding Predict Venture Capital Investments?

Cited by 10 publications

References 82 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

They do not look alike: what kind of private investors do equity crowdfunded firms attract?

Using Crunchbase for economic and managerial research

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