Founder Teams: Campaign Success and Venture Failure

Abstract

This paper examines whether solo founders are more likely to succeed in an initial equity crowdfunding (ECF) campaign and are subsequently less likely to fail than founder teams for a large sample of initial ECF campaigns conducted on the three largest UK platforms: Crowdcube, Seedrs and SyndicateRoom. The results show that solo founders have a lower probability of conducting successful initial ECF offerings than founder teams, and are also more likely to fail thereafter. The implication that founder teams enjoy more success is due to the fact that the quality of their human capital may likely attract professional investors who can act as a certification effect. Likewise, the monitoring role of professional investors helps to minimize moral hazard concerns and thus lowers the likelihood of failure for ECF founder teams. The results also establish that founder team human capital characteristics are significant determinants of initial ECF campaign outcomes and venture failure.

Keywords: Equity crowdfunding, founder team, human capital, signalling

JEL Classification: G240, M130