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

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Listed:
  • Vincenzo Butticè

    (Politecnico Di Milano)

  • Francesca Pietro

    (The University of Dublin)

  • Francesca Tenca

    (Politecnico Di Milano)

Abstract

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.

Suggested Citation

  • Vincenzo Butticè & Francesca Pietro & Francesca Tenca, 2022. "They do not look alike: what kind of private investors do equity crowdfunded firms attract?," The Journal of Technology Transfer, Springer, vol. 47(6), pages 1707-1736, December.
    • Handle: RePEc:kap:jtecht:v:47:y:2022:i:6:d:10.1007_s10961-021-09895-w
    DOI: 10.1007/s10961-021-09895-w
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    More about this item

    Keywords

    Equity crowdfunding; Venture capital; Reputation; Follow-on financing; Post campaign performance;
    All these keywords.

    JEL classification:

    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups

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