Signaling in Equity Crowdfunding
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In this article, the authors examine the impact of firms' financial roadmaps (e.g., pre-planned exit strategies such as IPOs or acquisitions), external certification (awards, government grants and patents), internal governance (such as board structure), and risk factors ( such as amount of equity offered and the presence of disclaimers) on fundraising success.Abstract:
This paper presents an initial empirical examination of which start-up signals will induce small investors to commit financial resources in an equity crowdfunding context. We examine the impact of firms’ financial roadmaps (e.g., preplanned exit strategies such as IPOs or acquisitions), external certification (awards, government grants and patents), internal governance (such as board structure), and risk factors (such as amount of equity offered and the presence of disclaimers) on fundraising success. Our data highlight the importance of financial roadmaps and risk factors, as well as internal governance, for successful equity crowdfunding. External certification, by contrast, has little or no impact on success. We also discuss the implications for successful policy design.read more
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Crowdfunding: Tapping the Right Crowd
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References
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Venture Capital and the Structure of Capital Markets: Banks Versus Stock Markets
TL;DR: In this article, the authors extend the debate on the relative efficiency of bank and stock market-centered capital markets by developing a further systematic difference between the two systems: the greater vitality of venture capital in stock market centered systems.
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Outside Enterpreneurial Capital
Abstract: This article investigates factors that affect rejection rates in applications for outside finance among different types of investors (banks, venture capital funds, leasing firms, factoring firms, trade customers and suppliers, partners and working shareholders, private individuals and other sources), taking into account the non-randomness in a firm’s decision to seek outside finance. The data support the traditional pecking order theory. Further, the data indicate that firms seeking capital are typically able to secure their requisite financing from at least one of the different available sources. However, external finance is often not available in the form that a firm would like. This article engages with four interrelated empirical questions. First, what are the characteristics of privately held entrepreneurial firms that seek external (outside) finance, and what drives the request for capital from the different potential sources of external finance: banks, venture capitalists, private individuals, leasing, factoring, suppliers/customers, partners/working shareholders, among other sources? Second, what are the factors that lead to rejection or acceptance of requests for external finance, given this non-randomness in the types of firms that seek external finance ‐ in the spirit of Heckman (1976; 1979)? Third, as various forms of financing are far from being perfect substitutes, are there differences in the ability of firms to obtain capital from the different available sources? Fourth, can firms obtain all of their desired capital from the different available sources, even if it is not in the form they would like? It is widely recognised that the decision to seek external finance and the type of financing sought is related to information asymmetries faced by investors regarding the entrepreneurial firm’s quality; see for example, Jensen and Meckling (1976). 1 Where
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The potential of actuarial decision models
Andrew Zacharakis,G. Dale Meyer +1 more
TL;DR: In this article, the authors developed a generalized actuarial decision aides that decompose a decision into component parts (or cues) and recombine those cues to predict the potential outcome, which can be used by junior associates or lower level employees.
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Signaling in Venture Capitalist—New Venture Team Funding Decisions: Does It Indicate Long-Term Venture Outcomes?
TL;DR: In this paper, the authors explore possible explanations for these findings, as well as their implications for signaling theory and future research, and test their hypotheses based on a sample of 183 VC-backed ventures that they tracked over a ten-year time period.
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