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Equity Crowdfunding in Germany and the UK: Follow-up Funding and Firm Failure

Author

Listed:
  • Lars Hornuf
  • Matthias Schmitt
  • Eliza Stenzhorn

Abstract

Today, startups often obtain financing via the Internet through many small contributions of non-sophisticated investors. Yet little is known about whether these startups can ultimately build enduring businesses. In this article, we hand-collected data from 14 different equity crowdfunding (ECF) portals and 426 firms that ran at least one successful ECF campaign in Germany or the United Kingdom. We empirically analyze different factors affecting follow-up funding and firm failure. The findings show that German firms that received ECF stood a higher chance of obtaining follow-up funding through business angels or venture capitalists, but also had a higher likelihood of failure. The number of senior managers, subsequent successful ECF campaigns, and the number of venture capital investors all had a positive impact on obtaining post-campaign financing, while firm age had a negative impact. Subsequent successful ECF campaigns were significant predictors decreasing firm failure.

Suggested Citation

  • 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.
    • Handle: RePEc:ces:ceswps:_6642
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    File URL: https://www.cesifo.org/DocDL/cesifo1_wp6642.pdf
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    References listed on IDEAS

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    Cited by:

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    2. Borello, Giuliana & De Crescenzo, Veronica & Pichler, Flavio, 2019. "Factors for success in European crowdinvesting," Journal of Economics and Business, Elsevier, vol. 106(C).

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    More about this item

    Keywords

    equity crowdfunding; follow-up funding; firm survival;
    All these keywords.

    JEL classification:

    • 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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