IDEAS home Printed from https://ideas.repec.org/a/bla/acctfi/v65y2025i5p4432-4445.html

The Importance of a Good Start: How Large Early Investments Shape Funding Dynamics in Equity Crowdfunding

Author

Listed:
  • Hao Chai
  • Yueyan Xing
  • Wei Wang
  • Yueqi Fan
  • Ye Liu

Abstract

We examine how large investments from early investors shape funding dynamics in equity crowdfunding. Using investor‐level data drawn from two Chinese equity crowdfunding platforms (Dreammove and Ifwolf), we find that large early investments significantly increase the amount pledged by subsequent investors in the same project. Specifically, investors pledge 13% more to projects that have received a prior large investment compared to those that have not. We also find that the effect intensifies with the number of large early investments and the number of days they occurred, and is stronger for angel investors than for crowd investors. Finally, we show that the effect strengthens when alternative signals of venture quality are weak. Overall, our findings reveal the mechanisms through which large early investments function as a key signal, highlighting the importance of a good start in equity crowdfunding.

Suggested Citation

  • Hao Chai & Yueyan Xing & Wei Wang & Yueqi Fan & Ye Liu, 2025. "The Importance of a Good Start: How Large Early Investments Shape Funding Dynamics in Equity Crowdfunding," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 65(5), pages 4432-4445, December.
    • Handle: RePEc:bla:acctfi:v:65:y:2025:i:5:p:4432-4445
    DOI: 10.1111/acfi.70089
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/acfi.70089
    Download Restriction: no
    File URL: https://libkey.io/10.1111/acfi.70089?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Jörg Prokop & Dandan Wang, 2022. "Is there a gender gap in equity-based crowdfunding?," Small Business Economics, Springer, vol. 59(3), pages 1219-1244, October.
    2. Lee, Neil & Sameen, Hiba & Cowling, Marc, 2015. "Access to finance for innovative SMEs since the financial crisis," Research Policy, Elsevier, vol. 44(2), pages 370-380.
    3. Johan, Sofia & Zhang, Yelin, 2020. "Quality revealing versus overstating in equity crowdfunding," Journal of Corporate Finance, Elsevier, vol. 65(C).
    4. Sofia Bapna & Martin Ganco, 2021. "Gender Gaps in Equity Crowdfunding: Evidence from a Randomized Field Experiment," Management Science, INFORMS, vol. 67(5), pages 2679-2710, May.
    5. Parhankangas, Annaleena & Renko, Maija, 2017. "Linguistic style and crowdfunding success among social and commercial entrepreneurs," Journal of Business Venturing, Elsevier, vol. 32(2), pages 215-236.
    6. Butticè, Vincenzo & Di Pietro, Francesca & Tenca, Francesca, 2020. "Is equity crowdfunding always good? Deal structure and the attraction of venture capital investors," Journal of Corporate Finance, Elsevier, vol. 65(C).
    7. Troise, Ciro & Matricano, Diego & Sorrentino, Mario & Candelo, Elena, 2022. "Investigating investment decisions in equity crowdfunding: The role of projects' intellectual capital," European Management Journal, Elsevier, vol. 40(3), pages 406-418.
    8. Lingfei Deng & Qiang Ye & DaPeng Xu & Wenjun Sun & Guangxin Jiang, 2022. "A literature review and integrated framework for the determinants of crowdfunding success," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 8(1), pages 1-70, December.
    9. Hornuf, Lars & Schwienbacher, Armin, 2018. "Market mechanisms and funding dynamics in equity crowdfunding," Journal of Corporate Finance, Elsevier, vol. 50(C), pages 556-574.
    10. Crosetto, Paolo & Regner, Tobias, 2018. "It's never too late: Funding dynamics and self pledges in reward-based crowdfunding," Research Policy, Elsevier, vol. 47(8), pages 1463-1477.
    11. Ye Liu & Ke Zhang & Weili Xue & Ziyu Zhou, 2024. "Crowdfunding innovative but risky new ventures: the importance of less ambiguous tone," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 10(1), pages 1-43, December.
    12. Feng Chen & Song Chen & Jian Ding & Ercheng Shan & Pu Zhao, 2024. "Let others know who your friends are: The effect of collaborator disclosure on crowdfunding performance," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 64(2), pages 1549-1568, June.
    13. Julian Bafera & Simon Kleinert, 2023. "Signaling Theory in Entrepreneurship Research: A Systematic Review and Research Agenda," Entrepreneurship Theory and Practice, , vol. 47(6), pages 2419-2464, November.
    14. 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.
    15. Vulkan, Nir & Åstebro, Thomas & Sierra, Manuel Fernandez, 2016. "Equity crowdfunding: A new phenomena," Journal of Business Venturing Insights, Elsevier, vol. 5(C), pages 37-49.
    16. Cynthia Weiyi Cai, 2018. "Disruption of financial intermediation by FinTech: a review on crowdfunding and blockchain," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 58(4), pages 965-992, December.
    17. Lin William Cong & Yizhou Xiao, 2024. "Information Cascades and Threshold Implementation: Theory and an Application to Crowdfunding," Journal of Finance, American Finance Association, vol. 79(1), pages 579-629, February.
    18. Jianjun Li & Ji Wu & Tairan Kevin Huang & Yu Guo, 2025. "Dialect Distance and Venture Capital Risk‐Taking: Evidence From China," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 65(5), pages 4352-4369, December.
    19. Mollick, Ethan, 2014. "The dynamics of crowdfunding: An exploratory study," Journal of Business Venturing, Elsevier, vol. 29(1), pages 1-16.
    20. Shuangfa Huang & David Pickernell & Martina Battisti & Thang Nguyen, 2022. "Signalling entrepreneurs’ credibility and project quality for crowdfunding success: cases from the Kickstarter and Indiegogo environments," Small Business Economics, Springer, vol. 58(4), pages 1801-1821, April.
    21. Nguyen, Thang & Cox, Joe & Rich, Judy, 2019. "Invest or regret? An empirical investigation into funding dynamics during the final days of equity crowdfunding campaigns," Journal of Corporate Finance, Elsevier, vol. 58(C), pages 784-803.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Lars Hornuf & Johannes Voshaar, 2024. "What Is an Effective Signal in Crowdfunding? Evidence from Expert Researchers and a Meta-Study," CESifo Working Paper Series 11501, CESifo.
    2. Mataigne, Virginie & Meoli, Michele & Vanacker, Tom & Vismara, Silvio, 2025. "False signaling by platform team members and post-campaign venture outcomes: Evidence from an equity crowdfunding platform," Journal of Business Venturing, Elsevier, vol. 40(1).
    3. Pau Sendra-Pons & Dolores Garzón & María-Ángeles Revilla-Camacho, 2024. "Catalyzing success in equity crowdfunding: trust-building strategies through signaling," Review of Managerial Science, Springer, vol. 18(9), pages 2699-2721, September.
    4. Koki KURIHARA & Yuji HONJO, 2022. "Determinants of Campaign Success: Empirical evidence from equity crowdfunding in Japan," Discussion papers 22057, Research Institute of Economy, Trade and Industry (RIETI).
    5. Maiolini, Riccardo & Cappa, Francesco & Franco, Stefano & Quaratino, Giovanni Raimondo, 2024. "The impact of sustainable development goals in lending-based prosocial crowdfunding: A topic modeling analysis on the kiva platform," International Review of Financial Analysis, Elsevier, vol. 95(PB).
    6. Ciro Troise & Guido Giovando & Fauzia Jabeen & Stefano Bresciani, 2024. "Unveiling the role of entrepreneurial teams in the equity crowdfunding journey," Small Business Economics, Springer, vol. 63(4), pages 1517-1538, December.
    7. Ivo Blohm & Moritz Schulz & Jan Marco Leimeister, 2024. "Hedonic Signals in Crowdfunding," Business & Information Systems Engineering: The International Journal of WIRTSCHAFTSINFORMATIK, Springer;Gesellschaft für Informatik e.V. (GI), vol. 66(6), pages 757-775, December.
    8. Yuji Honjo & Koki Kurihara, 2024. "Target for campaign success: an empirical analysis of equity crowdfunding in Japan," The Journal of Technology Transfer, Springer, vol. 49(3), pages 926-958, June.
    9. Rama, Ali & Jiang, Chunxia & Johan, Sofia & Liu, Hong & Mai, Yong, 2022. "Religious and social narratives and crowdfunding success," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 80(C).
    10. Nguyen, Thien Le-Hoang & Hsieh, Hui-Ching, 2025. "Iron curtain echoes: The enduring impact of communism and crowdfunding," Journal of Corporate Finance, Elsevier, vol. 91(C).
    11. Jinjuan Yang & Jiayuan Xin & Yan Zeng & Pei Jose Liu, 2025. "Signaling and perceiving on equity crowdfunding decisions — a machine learning approach," Small Business Economics, Springer, vol. 65(1), pages 315-356, June.
    12. Xiaohong Huang & Rezaul Kabir & Thuy Ngoc Nguyen, 2024. "Do project quality and founder information signals always matter? Evidence from equity and reward crowdfunding," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 29(3), pages 3309-3325, July.
    13. Swati Oberoi & Rohit Joshi & Atul Mehta & Smita Srivastava & Vishal K. Gupta, 2024. "Crowdfunding Research: Critical Analysis and Constructive Agenda for Future Inquiry," Journal of Entrepreneurship and Innovation in Emerging Economies, Entrepreneurship Development Institute of India, vol. 33(3), pages 651-699, August.
    14. Muneer M. Alshater & Rim El Khoury & Marah Ferdous & Indri Supriani, 2026. "Reward-based crowdfunding: A hybrid review of trends, opportunities, and future research directions," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 12(1), pages 1-64, December.
    15. Maximilian Goethner & Sebastian Luettig & Tobias Regner, 2021. "Crowdinvesting in entrepreneurial projects: disentangling patterns of investor behavior," Small Business Economics, Springer, vol. 57(2), pages 905-926, August.
    16. Sven Siebeneicher & Ilker Yenice & Carolin Bock, 2022. "Financial-Return Crowdfunding for Energy and Sustainability in the German-Speaking Realm," Sustainability, MDPI, vol. 14(19), pages 1-23, September.
    17. Marco Bade & Martin Walther, 2021. "Local preferences and the allocation of attention in equity-based crowdfunding," Review of Managerial Science, Springer, vol. 15(8), pages 2501-2533, November.
    18. Giuseppe Valenza & Marco Balzano & Mario Tani & Andrea Caputo, 2023. "The role of equity crowdfunding campaigns in shaping firm innovativeness: evidence from Italy," European Journal of Innovation Management, Emerald Group Publishing Limited, vol. 26(7), pages 86-109, January.
    19. Caroline Lindlar & Eva Alexandra Jakob & Jeannette Mai Dinh & Marius Claus Wehner, 2025. "Failure signals in sustainable crowdfunding: distinct reactions driven by crowd investors’ experience," Small Business Economics, Springer, vol. 65(3), pages 1877-1907, October.
    20. Ye Liu & Ke Zhang & Weili Xue & Ziyu Zhou, 2024. "Crowdfunding innovative but risky new ventures: the importance of less ambiguous tone," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 10(1), pages 1-43, December.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:acctfi:v:65:y:2025:i:5:p:4432-4445. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://edirc.repec.org/data/aaanzea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.