Equity Crowdfunding: Brave Market or Safe Haven for the Crowd During the COVID-19 Crisis?

Abstract

By analyzing a full dataset of 437 Italian equity crowdfunding campaigns over the period 2014-2020, and then by focusing on a sub-sample of 79 projects posted on the websites of platforms from January 2020 to June 2020, this chapter explores the impact of the COVID-19 pandemic on the Italian equity crowdfunding sector. In detail, we investigate whether and to what extent the key drivers (i.e. female founders, social capital and equity offered) that brought backers to finance a specific project before COVID-19 are the same nowadays, and which type of ventures backers are more prone to finance via equity crowdfunding in the aftermath of the crisis. We provide evidence that the strength of the effect of our key variables on the campaign’s success has changed during the COVID-19 crisis. We also find that backers are more prone to finance companies with a high level of R&D expenditure and technological projects. Moreover, we point out that ventures not located in a red zone are more likely to be successfully financed by backers and that they are more willing to invest in projects launched in platforms implementing specific measures in response to COVID-19.

Keywords: Entrepreneurial Finance, Signaling Theory, Crisis, COVID-19, Behavioral Finance, Red Zones

JEL Classification: D82, G24, G30, G32, L26, M13