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Funding Dynamics in Crowdinvesting

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  • Lars Hornuf
  • Armin Schwienbacher

Abstract

We use hand-collected data from four German crowdinvesting portals to analyze what determines individual investment decisions in crowdinvesting. In contrast with the crowdfunding campaigns on Kickstarter where the typical pattern of project support is U-shaped, we find crowdinvesting dynamics to be L-shaped under a first-come, first-serve mechanism and only U-shaped under a sealed-bid second-price auction. The evidence further shows that investors base their decisions on information provided by the entrepreneur in form of updates during the campaign and by the investment behavior and comments of other crowd investors. We also find evidence for herding behavior. As legislators around the world increasingly regulate crowdinvesting activities, knowing how crowd investors behave under no formal information disclosure provides important insights for issuers, portals, and lawmakers.

Suggested Citation

  • Lars Hornuf & Armin Schwienbacher, 2015. "Funding Dynamics in Crowdinvesting," Research Papers in Economics 2015-09, University of Trier, Department of Economics.
    • Handle: RePEc:trr:wpaper:201509
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    References listed on IDEAS

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    11. Lars Hornuf & Matthias Neuenkirch, 2017. "Pricing shares in equity crowdfunding," Small Business Economics, Springer, vol. 48(4), pages 795-811, April.
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    Citations

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    Cited by:

    1. Mónika Kuti & Zsolt Bedõ & Dorottya Geiszl, 2017. "Equity-based Crowdfunding," Financial and Economic Review, Magyar Nemzeti Bank (Central Bank of Hungary), vol. 16(4), pages 187-200.
    2. Jörn Block & Lars Hornuf & Alexandra Moritz, 2018. "Which updates during an equity crowdfunding campaign increase crowd participation?," Small Business Economics, Springer, vol. 50(1), pages 3-27, January.
    3. Silvio Vismara, 2018. "Information Cascades among Investors in Equity Crowdfunding," Entrepreneurship Theory and Practice, , vol. 42(3), pages 467-497, May.
    4. Mohammadi, Ali & Shafi, Kourosh, 2015. "The contribution patterns of equity-crowdfunding investors: Gender, Risk aversion and Observational learning," Working Paper Series in Economics and Institutions of Innovation 419, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies.
    5. Kazem Mochkabadi & Christine K. Volkmann, 2020. "Equity crowdfunding: a systematic review of the literature," Small Business Economics, Springer, vol. 54(1), pages 75-118, January.
    6. Lars Hornuf & Matthias Neuenkirch, 2017. "Pricing shares in equity crowdfunding," Small Business Economics, Springer, vol. 48(4), pages 795-811, April.
    7. Gregor Dorfleitner & Lars Hornuf & Martina Weber, 2017. "Dynamics of Investor Communication in Equity Crowdfunding," Research Papers in Economics 2017-04, University of Trier, Department of Economics.
    8. Friedemann Polzin & Helen Toxopeus & Erik Stam, 2018. "The wisdom of the crowd in funding: information heterogeneity and social networks of crowdfunders," Small Business Economics, Springer, vol. 50(2), pages 251-273, February.
    9. Kate Gasparro & Ashby Monk, 2020. "Demystifying “localness†of infrastructure assets: Crowdfunders as local intermediaries for global investors," Environment and Planning A, , vol. 52(5), pages 878-897, August.
    10. Ali Mohammadi & Kourosh Shafi, 2018. "Gender differences in the contribution patterns of equity-crowdfunding investors," Small Business Economics, Springer, vol. 50(2), pages 275-287, February.
    11. Katarina Durdenic, 2017. "Crowdfunding - Croatian legal perspective and comparison to other sources of financing," Public Sector Economics, Institute of Public Finance, vol. 41(2), pages 259-287.
    12. Lars Hornuf & Matthias Schmitt & Eliza Stenzhorn, 2017. "Equity Crowdfunding in Germany and the UK: Follow-up Funding and Firm Failure," CESifo Working Paper Series 6642, CESifo.
    13. Jörn Block & Lars Hornuf & Alexandra Moritz, 2016. "Which updates during an equity crowdfunding campaign increase crowd participation? An exploratory analysis," Research Papers in Economics 2016-06, University of Trier, Department of Economics.
    14. Joseph Denis Njayou Oyong, 2022. "Analyse Exploratoire De La Représentation Du Marche De L'Equity Crowdfunding Par Les Investisseurs Particuliers Exploratory Analysis Of The Perception Of Individual Investors Of The Equity Crowdfundin," Post-Print hal-03777041, HAL.
    15. Alice Rossi & Silvio Vismara, 2018. "What do crowdfunding platforms do? A comparison between investment-based platforms in Europe," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 8(1), pages 93-118, March.

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    More about this item

    Keywords

    crowdinvesting; startups; securities issuance; IPO investment dynamics; entrepreneurial finance;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups

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