Target for campaign success: an empirical analysis of equity crowdfunding in Japan

Abstract

This study investigates campaign success in equity crowdfunding, using campaigns listed on a leading Japanese equity crowdfunding platform with an all-or-nothing rule. We examine how campaign success depends on campaign- and firm-specific characteristics, including the campaign target amount. We find that patenting positively affects campaign success and the campaign target amount. The results indicate that innovative firms have a higher probability of campaign success, while they set a higher target amount. We also provide evidence that campaigns that have already provided services and products have a lower probability of success, although not always significant, and firms tend to set a lower target amount. Moreover, campaigns launched by venture capital-backed firms are more likely to succeed than others. Furthermore, campaigns launched by firms eligible for the Angel Tax System, introduced in Japan as a tax incentive for investment in young and small firms, have a higher tendency to succeed in equity crowdfunding. Our findings suggest that the Angel Tax System attract more crowd investors and such tax incentives help raise funds on equity crowdfunding platforms for new businesses.

Regulatory framework on governing equity crowdfunding: a systematic literature review and future directions

“…Taiwan For Non-accredited investors: the limit is NT$50K/firm; Per platform, limit is TW$100K (Honjo and Kurihara, 2023) If the company capital is less than TW$30m: the limit is NT$15m.…”

“…Else: no limits (Honjo and Kurihara, 2023) Equity Singapore No limits (Long and Chan, 2020) The limit is SG$5m for all offers without a prospectus (Long and Chan, 2020) Equity Malaysia Equity (continued) Securities For retail investors: the limit is RM 5K/firm; overall RM 50K. For angel investors: the limit is RM 500K.…”

“…Capital requirements EU Firm needs to disclose the expenses involved in crowdfunding activities (Borin and Fantini, 2023;Hornuf and Schwienbacher, 2017) EUR 730K set by Markets in the Financial Instruments Directive (MiFID), BUT EUR 125K if a firm does not deal with its account (Borin and Fantini, 2023;Hornuf and Schwienbacher, 2017) Asia Malaysia Disclosure of the ECF platform investing in the fundraising firm (Wasiuzzaman and Suhili, 2023) No Capital Requirements (Wasiuzzaman and Suhili, 2023) Singapore Risk disclosure statement validated by every investor (Long and Chan, 2020) Platform operators must have minimum SGD 50, 000 (Long and Chan, 2020) Taiwan No disclosure Obligations (Honjo and Kurihara, 2023) The platform should have capital of more than TW$50m; companies must have less than TW$30m (Honjo and Kurihara, 2023) Thailand Information on shares to be issued through the ECF platform (Auchupap, 2022) No capital requirements (Auchupap, 2022) Australia Australia Risk statement (Bose and Rushdi, 2023;Kamalnath and Lin, 2019) No capital requirements (Bose and Rushdi, 2023;Kamalnath and Lin, 2019) New Zealand Information regarding how the service works and the fees involved (Mazzocchini and Lucarelli, 2022;Kamalnath and Lin, 2019) No capital requirements…”

Role of successive round as a quality signal in equity crowdfunding: Novel evidence from the perspective of investors’ preferences

“…Consequently, a major chunk of existing studies delves into the investigation of factors contributing to the success of crowdfunding campaigns. These studies examined how entrepreneurs can effectively persuade equity crowdfunders to invest during the campaign [ 18 – 23 ]. However, investors’ perspective is largely neglected in existing studies [ 17 , 24 ].…”

“…In this stream of research, existing studies also documented that past successful equity crowdfunding campaigns help firms in obtaining funds from venture capital [ 18 – 20 , 44 , 61 – 63 ]. It means that past successful equity crowdfunding campaigns can lower information asymmetry and works as quality signal in subsequent equity crowdfunding campaigns.…”