Generell

Why Crowdfunding Projects can Succeed: The Role of Proponents ’ Individual and Territorial Social Capital

Giudici, G.,
Guerini, M.,
Rossi-Lamastra, C.

In this paper, the authors aim at learning more on what determines the probability of a project to reach the target funding. They apply the lens of social capital, defined by the goodwill available to her/him from the structure and content of his/her social relations. In particular they distinguish between ‘individual’ (exclusive) and ‘territorial’ (locally shared) social capital. They test their hypotheses by running Probit estimates on a sample of 461 crowdfunding projects posted by 699 proponents and hosted on 11 Italian crowdfunding platforms.  This methodology puts in evidence that in a framework with information asymmetry individual social capital (ISC) is positively and significantly correlated with the probability of success of a crowdfunding project. On the contrary, authors do not find any significant correlation with the diffused territorial social capital (TSC).

2013
Italy
Working Paper
Generell

Crowdfunding: The New Frontier for Financing Entrepreneurship?

Giudici, G.,
Nava, R.,
Rossi-Lamastra, C.,
Verecondo, C.

This paper provides a systematization of what it is known on crowdfunding, which can be useful to scholars, practitioners, and policymakers interested in the phenomenon from different angles. It first reviews the emergent literature on the theme to single out the aspects that so far have attracted the bulk of scholarly interest. Then, it compares the crowdfunding with other forms of entrepreneurial finance. Finally, it offers a first survey on Italian crowdfunding platforms.

2012
Italy
Working Paper
Generell

The Narrative Advantage: Gender and the Language of Crowdfunding

Gorbatai, A.,
Nelson, L.

In this study, the authors evaluate the influence of linguistic content on fundraising outcomes, above and beyond type of product or service offered. Online fundraising settings pose an interesting empirical puzzle: women are systematically more successful than men, an outcome contrary to offline gender inequality. They propose that this outcome is partially explained by linguistic differences between men and women in terms of language they use, and they test this mechanism using data from the online crowdfunding platform Indiegogo. The results support their theory, suggesting a link between micro-level linguistic choices and macro level outcomes: the institution of crowdfunding may reduce gender inequalities in the fundraising arena by benefitting the communication style of women.

2015
USA
Working Paper
Generell

Leaning in or leaning on? Gender, homophily, and activism in crowdfunding

Greenberg, J.,
Mollick, E.

Using data from crowdfunding, the authors empirically examine whether higher proportions of female funders lead to higher success rates in capital-raising for women. They find that women outperform men, and are more likely to succeed at a crowdfunding campaign, all other things being equal. Surprisingly, this effect primarily holds for female founders proposing technological projects, a category that is largely dominated by male founders and funders. This finding stands in stark contrast to expectations concerning homophily. A laboratory experiment helps explain how this pattern might emerge and allows us to theorize about the types of choice homophily driving results. They find that a small proportion of female backers disproportionately support women-led projects in areas where women are historically underrepresented. This suggests an activist variant of choice homophily, and implies that mere representation of female funders without activism may not always be enough to overcome the barriers faced by female founders.

2015
USA
Working Paper
Generell

Crowdfunding: fleecing the amercian masses

Griffin, Z. J.

This article discusses why securities offerings using crowdfunding should not be exempted from the registration requirements of the federal securities laws in USA. First, it introduces the concept of crowdfunding and the five different categories of crowdfunding. Then it discusses the registration requirements under the Securities Act of 1933, why registration is not feasible for most crowdfunded ventures, and the conflicts between crowdfunding and the current registration exemptions. Finally, the article discusses why crowdfunding should not be exempted from the registration requirements, specifically focusing on how such an exemption would severely weaken investor protections and open the door for fraud to permeate the market.

2012
USA
Working Paper
Generell

A snapshot on crowdfunding

Hemer, J.
Working papers firms and region

This article addresses crowdfunding, a relatively new form of informal financing of projects and ventures. It describes its principle characteristics and the range of players in this market. The different business models of crowdfunding intermediaries are explored and illustrated. A first attempt is made to classify the different forms of funding and business models of crowdfunding intermediaries. Based on the available empirical data the paper discusses the economic relevance of crowdfunding and its applicability to start-up financing and funding creative ventures and research projects.

2011
Germany
Working Paper
Generell

Skin in the Game: Incentives in Crowdfunding

Hildebrand, T.,
Puri, M.,
Rocholl, J.

This paper analyses the incentives in the markets for crowdfunding. Authors are able to take advantage of the elimination of origination fees (group leader rewards) in an online social lending market and use a difference-in-difference approach to see how the same lenders behave when the origination fees are eliminated. The results show that there is a marked change in the incentives of these group leaders, which affect the kind of loans being originated and the performance of these loans. When group leaders earn rewards, the default rates are substantially higher for the loans that they originate, while, after the abolition of rewards, group leaders originate loans with significantly lower borrower default rates. The results provide important implications for the incentives in crowdfunding as well as the question of how retail consumers can be protected against unscrupulous lending and thus the ongoing debate about the proper regulatory framework for consumer lending.

2011
Germany
Working Paper
Generell

Adverse Incentives in Crowdfunding

Hildebrand, T.,
Puri, M.,
Rocholl, J.

This paper analyses the substantially growing markets for crowdfunding, in which retail investors lend to borrowers without financial intermediaries. Critics suggest these markets allow sophisticated investors to take advantage of unsophisticated investors. The growth and viability of these markets critically depends on the underlying incentives. The document provides evidence of perverse incentives in crowdfunding that are not fully recognized by the market. In particular it looks at group leader bids in the presence of origination fees and finds that these bids are (wrongly) perceived as a signal of good loan quality, resulting in lower interest rates. Yet these loans actually have higher default rates. These adverse incentives are overcome only with sufficient skin in the game and when there are no origination fees. The results provide important implications for crowdfunding, its structure and regulation.

2014
Germany
Working Paper
Generell

Funding dynamics in crowdinvesting

Hornuf, L.,
Schwienbacher, A.

The authors use hand-collected data from four German crowdinvesting portals to analyze what determines individual investment decisions. In contrast with the crowdfunding campaigns on Kickstarter, where the typical pattern of project support is U-shaped, they find crowdinvesting dynamics to be L-shaped under a first-come, first-serve mechanism and only U-shaped under a sealed-bid second-price auction. The evidence further shows that investors base their decisions on information provided by the entrepreneur in form of updates during the campaign and by the investment behavior and comments of other crowd investors. They also find evidence for herding behavior.

2015
Germany and France
Working Paper
Generell

Community Impact on Crowdfunding Performance

Inbar, Y.,
Barzilay, O.

This study provides a theoretical framework and empirical evidence regarding the impact of the online community on platform performance.  It is theorized that online platforms, such as Kickstarter, consist not of a single community but rather a hierarchy of multiple, partially competing communities. The proposed framework allows to identify such communities’ changes and, consequently, to better identify pivotal members of online communities and predict their lifetime value as potential backers.

The document demonstrates the growth of the different community types and estimates their different impacts on crowdfunding performance over time. Interestingly, it is found that some communities, despite high participation rates, had negative impacts on crowdfunding campaign success. It is discussed managerial and practical implications of our theory and findings.

2014
Israel
Working Paper

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