Equity crowdfunding: Success factors in the German context

Cem Kose, Hao Manh Quach, Duyen Dai Chu

Abstract


The emergence of equity crowdfunding has provided ventures at early stages of development with an important alternative source of finance over the past decade. However, it is still relatively understudied and many equity crowdfunding campaigns are still unsuccessful. This paper make contributions into research on success factors in equity crowdfunding. Drawing on a sample dataset of 93 campaigns collected from the two biggest equity platforms in Germany, our findings provide evidence that success factors from traditional entrepreneurial finance can be relevant in predicting success in equity crowdfunding context. Our findings also show that numerous campaign characteristics and the use of social media networks can be success drivers in equity crowdfunding. Our findings are supported by rigorous diagnostic tests.


Keywords


Equity crowdfunding, success factors, German market, innovative entrepreneurial finance

Full Text:

PDF

References


Ahlers, G.K.C., Cumming, D., Günther, C. and Schweizer, D. (2015) Signaling in Equity Crowdfunding. Entrepreneurship Theory & Practice 39(4) 955-980. Available from https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2161587 [accessed 14 August 2017].

Belleflamme, P., Lambert, T. and Schwienbacher, A. (2013) Individual crowdfunding practices. Venture Capital, 15(4) 313–333. Available from https://perso.uclouvain.be/paul.belleflamme/papers/VC2013.pdf [accessed 19 August 2017].

Belleflamme, P., Lambert, T., & Schwienbacher, A. (2014). Crowdfunding: Tapping the right crowd. Journal of business venturing, 29(5), 585-609. Available from http://www.sciencedirect.com/science/article/pii/S0883902613000694 [accessed 10 July 2017].

Block, J., Hornuf, L. and Moritz, A. (2016) Which Updates During an Equity Crowdfunding Campaign Increase Crowd Participation? Research Papers in Economics No. 6/16. Available from https://papers.ssrn.com/sol3/papers.3cfm?abstract_id=2781715 [accessed 11 Juli 2017].

Borello, G., De Crescenzo, V., Pichler, F. (2015) The Funding Gap and The Role of Financial Return Crowdfunding: Some Evidence From European Platforms. Journal of Internet Banking & Commerce, 20(1). Available from http://www.icommercecentral.com/open-access/the-funding-gap-and-the-role-of-financial-returncrowdfunding-some-evidence-from-european-platforms.pdf [accessed 29 August 2017].

Chiu, C.-M., Liang, T.-P., Turban, E. (2014) What can crowdsourcing do for decision support? Decision Support Systems 65 40–49. Available from http://www.sciencedirect.com/science/article/pii/S016792361400150X [accessed 10 July 2017].

Colombo, M.G., Franzoni, C. and Rossi-Lamastra, C. (2014) Internal social capital and the attraction of early contributions in crowdfunding. Available from http://www.massimogcolombo.com/static/publications/Colombo%20Franzoni%20Rossi-Lamastra%202014%20ETP.pdf [accessed 17 July 2017].

Companisto (2017) How it works. Available from https://www.companisto.com/de/how-it-works [accessed 10 July 2017].

Crowdfunding (2016) Marktreport 2016 Crowdinvesting in Deutschland. Berlin. Available from https://www.crowdfunding.de/wp-content/uploads/2017/02/Crowdinvesting-Marktreport-2016-crowdfunding.de_.pdf [accessed 12 August 2017].

Crowdfunding (2017). Marktreport 2016 Crowdinvesting in Deutschland. Available from https://www.crowdfunding.de/wp-content/uploads/2017/02/Crowdinvesting-Marktreport-2016-crowdfunding.de_.pdf [accessed 19 July 2017].

Crowdsourcing (2015) Report: 2015CF Crowdfunding Industry Report. Available from http://reports.crowdsourcing.org/index.php?route=product/product&product_id=54 [accessed 15 August 2017].

Cumming, D.J., Leboeuf, G., Schwienbacher, A. (2015) Crowdfunding Models: Keep-it-all vs. All-or-nothing. Available from http://leeds-faculty.colorado.edu/bhagat/CrowdfundingModels-KeppItAll-AllorNothing.pdf [accessed 27 July 2017].

Dorff, M.B. (2014) The siren call of equity crowdfunding. Journal of Corporation Law 39 (3) 493–524. Available from https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2325634 [accessed 09 August 2017].

European Commission (2016) Capital Markets Union: Commission supports crowdfunding as alternative source of finance for Europe's start-ups. Brussels: European Commission. Available from http://europa.eu/rapid/press-release_IP-16-1647_en.htm?locale=en [accessed 14 August 2017].

European Commission (2016) Crowdfunding in the EU Capital Markets Union. Brussels: European Commission. Available from https://ec.europa.eu/transparency/regdoc/rep/10102/2016/EN/10102-2016-154-EN-F1-1.PDF [accessed 14 August 2017].

Frydrych, D., Bock, A.J., Kinder, T. and Koeck, B. (2014) Exploring entrepreneurial legitimacy in reward-based crowdfunding. Venture Capital, 16 (3) 247-269. Available from http://eds.a.ebscohost.com.proxy.library.lincoln.ac.uk/eds/pdfviewer/pdfviewer?vid=1&sid=bf27cb54-0b8e-44e9-b318-ec9337b350ba%40sessionmgr4008 [accessed 15 August 2017].

Giudici, G., Guerini, M., Rossi Lamastra, C. (2013) Why crowdfunding projects can succeed: the role of proponents’ individual and territorial social capital. Available from https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2255944 [accessed 14 August 2017].

Hakenes, H., Schlegel, F. (2014) Exploiting the Financial Wisdom of the Crowd: Crowdfunding as a Tool to Aggregate Vague Information. Available from http://ssrn.com/abstract=2475025 [accessed 22 July 2017].

Härkönen, J. (2014) Crowdfunding and its Utilization for Startup Finance in Finland: Factors of a Successful Campaign. Available from https://www.doria.fi/xmlui/bitstream/handle/10024/96798/Master%27s%20Thesis%20-%20Jirka%20Härkönen%2021.5.14.pdf?sequence=2 [accessed 02 September 2017].

Hornuf, L. and Schwienbacher, A. (2014) The Emergence of Crowdinvesting in Europe. Munich Discussion Paper, (43). Available from https://epub.ub.uni-muenchen.de/21388/1/Hornuf%20Schwienbacher%20-%20The%20Emergence%20of%20Crowdinvesting%20in%20Europe.pdf [accessed 10 August 2017].

Hornuf, L. and Schwienbacher, A. (2017) Market mechanisms and funding dynamics in equity crowdfunding. Available from https://poseidon01.ssrn.com/delivery.php?ID=820106101027026098084065104112064122037089089042053026107097124081072117064018020108060016059063040047117002119071015094103074007082044064086014009080014117073125002010013118096115078028086080126082017123075123088088127116107103111097084087102124123&EXT=pdf [accessed 04 September 2017].

Ibrahim, D.M. (2010) Financing the Next Silicon Valley. Washington University Law Review, Vol. 87, 718-762. Available from https://poseidon01.ssrn.com/delivery.php?ID=802090099084097024109122107006064077034006049004090060007080003125110017072004093093036054102063060023041088066028110008102069056058059054003108100030121088029070017041000099111098030107105000028097086085003117103087084111109031092126111108089017081&EXT=pdf [accessed 07 August 2017].

Koch, J. A., Siering, M. (2015) Crowdfunding success factors: The characteristics of successfully funded projects on crowdfunding platforms, Spring 5-29-2015. Available from http://aisel.aisnet.org/cgi/viewcontent.cgi?article=1105&context=ecis2015_cr [accessed 30 July 2017].

Kuppuswamy, V., Bayus, B. L. (2015) Crowdfunding Creative Ideas: The Dynamics of Project Backers in Kickstarter. UNC Kenan-Flagler Research Paper No. 2013-15. Available from https://ssrn.com/abstract=2234765 [accessed 14 July 2017].

Lin, M., Prabhala, N. R., and Viswanathan, S. (2013) “Judging Borrowers by the Company they Keep: Friendship Networks and Information Asymmetry in Online Peer-to-Peer Lending.” Management Science, 59(1) 17–35. Available from http://www.cafral.org.in/sfControl/content/Speech/47201612710PM-Lin_Prabhala_Viswanathan_Paper.pdf [accessed 07 August 2017].

Lukkarinen et al. (2016) Success drivers of online equity crowdfunding campaigns. Decision Support Systems, (87) 26-38. Available from [accessed 21 July 2017].

Meyskens, M. and Bird, L. (2015) Crowdfunding and Value Creation. Entrepreneurship Research Journal, 5 (2) 155-166, Available from https://www.researchgate.net/publication/277637559_Crowdfunding_and_Value_Creation [accessed 02 September 2017].

Mitra, T., Gilbert. E. (2014) The language that gets people to give: Phrases that predictsuccess on Kickstarter. Available from http://comp.social.gatech.edu/papers/cscw14.crowdfunding.mitra.pdf [accessed 23 August 2017].

Mollick, E. (2013) Swept away by the crowd? Crowdfunding, venture capital, and the selection of entrepreneurs. Available from https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2239204 [accessed 13 July 2017].

Mollick, E. (2014) The dynamics of crowdfunding: an exploratory study. Journal of Business Venturing 29 1–16. Available from http://www.sciencedirect.com/science/article/pii/S088390261300058X#bb0185 [accessed 10 August 2017].

Ralcheva, A. and Roosenboom, P. (2016) On the road to success in equity crowdfunding. SSNR. Available from https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2727742, [accessed 22nd January 2018].

Rossi, M. (2014) The new ways to raise capital: an exploratory study of crowdfunding. International Journal of Financial Research 5 (2) 8–18. Available from http://www.sciedu.ca/journal/index.php/ijfr/article/view/4536 [accessed 10 September 2017].

Ten Hacken, L. (2014) What determines the success of a crowdfunding project. Bachelor. Erasmus University Rotterdam. Available from https://thesis.eur.nl/pub/17608/Hacken-L.A.-ten-343295lh-.pdf [accessed 06 August 2017].

Vismara, S. (2016) Equity retention and social network theory in equity crowdfunding. Small Business Economics, 46 579-590.

Vismara, S. (2017) “Information Cascades Among Investors in Equity Crowdfunding.” Entrepreneurship Theory and Practice, forthcoming. Available from https://www.researchgate.net/publication/291379052_Information_Cascades_among_investors_in_Equity_Crowdfunding [accessed 03 September 2017].

Zheng, H., Li, D., Wu, J. and Xu, Y. (2014) The role of multidimensional social capital in crowdfunding: A comparative study in China and US. Information and Management, 51, 488-496. Available from https://ai2-s2-pdfs.s3.amazonaws.com/5156/a86e1c3173d91f547320df77ee426183c3c1.pdf [accessed 30 July 2017].




DOI: http://dx.doi.org/10.25506/LEMP12201957

Refbacks

  • There are currently no refbacks.


Copyright (c) 2019 Cem Kose, Hao Manh Quach, duyen dai chu

Creative Commons License
This work is licensed under a Creative Commons Attribution 4.0 International License.