Equity Retention and Social Network Theory in Equity Crowdfunding
25 Pages Posted: 2 Sep 2015
Date Written: September 1, 2015
Abstract
After comparing the regulation and development of equity crowdfunding around the world, this paper investigates the signaling role played toward crowdfunders by equity retention and social capital. Using a sample of 271 projects listed on the UK platforms Crowdcube and Seedrs in the period 2011-2014, we find that campaigns launched by entrepreneurs who (1) sold a smaller fraction of their companies at listing and (2) had more social capital had higher probabilities of success. Our results combine findings in classical entrepreneurial finance settings, like venture capital and IPOs, with evidence from other, non-equity crowdfunding markets.
Keywords: Equity, Crowdfunding, Signaling, Network theory, National Systems of Entrepreneurship, Entrepreneurial finance
JEL Classification: G30
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