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How Wise are Crowds on Crowdfunding Platforms?

In: The Palgrave Handbook of Technological Finance

Author

Listed:
  • Gilles Chemla

    (Imperial College Business School)

  • Katrin Tinn

    (McGill University)

Abstract

While firms have obtained outside financing from large numbers of investors on financial markets for centuries, online crowdfunding platforms have only emerged as a major source of funding for start-ups and new projects for a decade. The information available to backers on crowdfunding platforms is generally coarse. This paper surveys the existing literature on the extent to which crowdfunding harnesses the wisdom of crowds. We discuss two broad categories of crowdfunding. Reward-based crowdfunding platforms such as Kickstarter, where backers typically have private and independent valuations, appear to offer environments that may harness the wisdom of crowds. In contrast, initial coin offerings (ICOs) offering services with network externalities and security-based platforms with common values appear to exhibit some results eliciting valuable information, but several results appear to point to informational cascades.

Suggested Citation

  • Gilles Chemla & Katrin Tinn, 2021. "How Wise are Crowds on Crowdfunding Platforms?," Springer Books, in: Raghavendra Rau & Robert Wardrop & Luigi Zingales (ed.), The Palgrave Handbook of Technological Finance, pages 397-406, Springer.
    • Handle: RePEc:spr:sprchp:978-3-030-65117-6_16
    DOI: 10.1007/978-3-030-65117-6_16
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    Cited by:

    1. Xiaohang Wu & Hasan Dinçer & Serhat Yüksel, 2022. "Analysis of crowdfunding platforms for microgrid project investors via a q-rung orthopair fuzzy hybrid decision-making approach," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 8(1), pages 1-22, December.
    2. Carole Gresse & Hugo Marin, 2021. "Geographical-Proximity Bias in P2B Crowdlending Strategies," Working Papers hal-03338244, HAL.

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