Equity crowdfunding : principles and investor behavior

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Abstract

The chapter provides a topical summary of the present research knowledge of equity crowdfunding. It describes the typical equity crowdfunding process, investor characteristics, and investor motivations. Recognizing the limited due diligence efforts of the crowd despite the presence of high information asymmetries, the chapter presents the role of platforms in evaluating and preselecting target ventures. Furthermore, it highlights the importance of rapidly observable campaign features and signals of venture quality in investor decision making, while also emphasizing the relevance of experienced investors and the herding tendency of crowdinvestors. The chapter offers a comparison of equity crowdfunding investors with traditional providers of early-stage equity financing including micro funders, angel investors, and venture capital funds. It concludes with a discussion of the challenges and potential of equity crowdfunding.
Keywords
Original languageEnglish
Title of host publicationAdvances in Crowdfunding : research and practice
PublisherPALGRAVE MACMILLAN
Pages93-118
ISBN (Electronic)978-3-030-46309-0
ISBN (Print)978-3-030-46308-3
DOIs
Publication statusPublished - 2020
MoE publication typeA3 Part of a book or another research book

Keywords

  • equity crowdfunding
  • investment
  • entrepreunial finance
  • venture capital
  • angel investors
  • micro funders
  • due diligence
  • early stage funding
  • information asymmetry
  • investor decision

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