Dynamics of Investor Communication in Equity Crowdfunding

In crowdfunding, start-ups can voluntarily communicate with their investors by posting updates. We investigate whether start-ups strategically use updates, which were previously shown to increase investments. To this end, we use hand-collected data of 751 updates and 39,036 investment decisions from the two major German equity crowdfunding portals Seedmatch and Companisto. We find evidence for strategic communication behavior of startups during an equity crowdfunding campaign. During the funding period, start-ups post updates with linguistic devices that enhance the group identity and the group cohesion. Furthermore, the probability of an update during the funding period increases with a strong competition of other contemporary crowdfunding campaigns

Gender Differences in Equity Crowdfunding

Online peer-to-peer investment platforms are increasingly popular venues for entrepreneurs and investors to engage in financial transactions without the involvement of banks and loan managers. Despite their purported transparency and lack of bias, it is unclear whether social inequalities present in traditional capital markets transfer to these platforms as well, impeding their hoped revolutionary potential. In this paper we analyze nearly four years' worth of data from one of the leading UK-based equity crowdfunding platforms. Specifically, we investigate gender-related differences in patterns of entrepreneurship, investment, and success. In agreement with offline trends, men have more activity on the platform. Yet, women entrepreneurs benefit of higher success rates in fund-raising, a finding that mimics trends seen on some rewards-based crowdfunding platforms. Surprisingly, we also find that female investors tend to choose campaigns that have lower success rates. Our findings contribute to a better understanding of gender-related discrepancies in success on the online capital market and point to differences in activity that are key factors in the apparent patterns of gender inequality

Evaluating Current Stage of Equity Crowdfunding Adoption in Indonesia: An Exploratory Study

Purpose: This study investigates the operational processes, oversight practices, investor incentives and business impacts in the localization of equity crowdfunding in Indonesia through an exploratory case study of the LandX platform. Design/Methodology/Approach: Qualitative data was collected through interviews with 5 key personnel of LandX and document analysis of 8 internal materials related to operational processes and financial outcomes. Data underwent inductive thematic analysis. Findings: Findings reveal LandX conducts structured due diligence encompassing weighted financial and qualitative criteria that represent industry best practices, balanced by outcome uncertainties. Investor incentives span portfolio diversification to personal passions, requiring tailored communication and education to ensure informed participation. While complying strictly with regulations, LandX also demonstrates responsible self-governance through transparency and protections that exceed policy requirements. Qualitative indications point to accelerated issuer growth, but quantified impact data remains limited. Practical Implications: Results provide insights into prudent navigation required to advance equity crowdfunding in Indonesia through platform diligence and education, calibrated outcome expectations, updated regulations, and multi-stakeholder collaboration. Originality/Value: This pioneering study provides timely qualitative insights into equity crowdfunding localization dynamics in the under-examined context of Indonesia. Paper Type: Case Stud

In crowdfunding we trust : a trust-building model in lending crowdfunding

Trust critically affects the perceived probability of receiving expected returns on investment. Crowdfunding differs in many ways from traditional forms of investing. We have to ask what builds trust in this particular context. Based on literature regarding the formation of initial trust, we developed a model to explain which factors lead to crowdfunders’ trust in a crowdfunding project. We tested it on data collected from actual investors in a real project on a crowdlending platform. Our results show that trust in the crowdfunding platform and the information quality are more important factors of project trust than trust in the creator

The role of crowdfunding in reducing the equity gap in Poland

The aim of the paper is to verify if equity crowdfunding has an impact on equity gap reduction among early stage companies in Poland. The analysis is based on crowdfunding campaigns organized on the three most popular platforms in Poland during the 2015–2019 period. The presented research on equity crowdfunding allowed the main goal of the paper to be accomplished, namely to characterize equity crowdfunding in Poland. The results obtained also enabled equity crowdfunding to be placed among other equity capital sources for companies in the early stages of development. The results of the study verify the hypothesis that equity crowdfunding has an impact on equity gap reduction among Polish early stage companies. Our key findings prove that equity crowdfunding in Poland is mainly used by relatively small, early stage companies that operate in various sectors. Another finding is that most of the companies raised capital that qualifies as the Macmillan gap. We also proved that there is a relatively high level of information asymmetry among equity crowdfunding campaigns and provided our own definition of equity crowdfunding. W niniejszym artykule podjęto próbę odpowiedzi na pytanie, czy crowdfunding udziałowy wpływa na ograniczenie luki kapitałowej wśród przedsiębiorstw na wczesnych etapach rozwoju w Polsce. W badaniach odniesiono się do kampanii crowdfundingowych przeprowadzonych na trzech najpopularniejszych platformach w Polsce w okresie 2015–2019. Otrzymane wyniki pozwoliły na realizację celu głównego, tj. scharakteryzowanie equity crowdfundingu w Polsce oraz umiejscowienie go pośród innych źródeł kapitału o charakterze udziałowym. Uzyskane wyniki potwierdzają przyjętą hipotezę główną, stanowiącą, że crowdfunding udziałowy ogranicza lukę kapitałową wśród przedsiębiorstw na wczesnych etapach rozwoju w Polsce. W ramach przeprowadzonych badań dowiedziono, że z crowdfundingu udziałowego w Polsce korzystają głównie na wczesnych etapach rozwoju niewielkie spółki z branż wysoko rozwiniętych. Jednocześnie zdecydowana większość z analizowanych projektów w ramach crowdfundingu udziałowego zakończyła się pozyskaniem kapitału mieszczącego się w luce kapitałowej Macmillana. Ponadto wykazano wysoką asymetrię informacji pomiędzy emitentem a inwestorem uczestniczącym w kampanii crowdfundingowej i zaproponowano autorską definicję crowdfundingu udziałowego.

German crowd-investing platforms: Literature review and survey

This article presents a comprehensive overview of the current German crowd-investing market drawing on a data-set of 31 crowd-investing platforms including the analysis of 265 completed projects. While crowd-investing market still only represents a niche in the German venture capital market, there is potential for an increase in both market volume and in average project investment. The market share is distributed among a few crowd-investing platforms with high entry barriers for new platforms although platforms that specialise in certain sectors have managed to successfully enter the market. German crowd-investing platforms are found to promote mainly internet-based enterprises (36%) followed by projects in real estate (24%) and green projects (19%), with the median money raised 100,000 euro

German crowd-investing platforms: Literature review and survey

This article presents a comprehensive overview of the current German crowd-investing market drawing on a data-set of 31 crowd-investing platforms including the analysis of 265 completed projects. While crowd-investing market still only represents a niche in the German venture capital market, there is potential for an increase in both market volume and in average project investment. The market share is distributed among a few crowd-investing platforms with high entry barriers for new platforms although platforms that specialise in certain sectors have managed to successfully enter the market. German crowd-investing platforms are found to promote mainly internet-based enterprises (36%) followed by projects in real estate (24%) and green projects (19%), with the median money raised 100,000 euro

Trust isn’t blind: Exploring Visual Investor Cues in Equity Crowdfunding

Overcoming informational uncertainty and financial risk remains a challenge for crowd investors to trust and interact within the equity crowdfunding (ECF) market. Based on the theoretical lens of herding behavior, we demonstrate that visual cues in investor profiles impact the investment decision of subsequent investors. Specifically, this paper provides preliminary evidence on the effect of investor profile images and badges on investment behavior and campaign funding. In a first study, we draw on a dataset of over 30,000 individual investment observations from a leading ECF platform to show that profile images in particular exert positive effects on subsequent investments. Study 2 will build on these findings through a discrete choice experiment. Our results indicate that herding is driven by the perception of credible investors triggered by heuristic cues. Implications for platform operators are discussed in the paper

Fostering Innovation and Entrepreneurship: Shark Tank Shouldn\u27t be the Model

For the past half century, innovation has driven the economic growth that has made the American economy the envy of the world. For most of this period, venture capitalists provided not only the capital that new innovative companies needed, but also the management expertise

Which updates during an equity crowdfunding campaign increase crowd participation?

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