Funding Dynamics in Crowdinvesting

Lars Hornuf and Armin Schwienbacher

No 2015-09, Research Papers in Economics from University of Trier, Department of Economics

Abstract: We use hand-collected data from four German crowdinvesting portals to analyze what determines individual investment decisions in crowdinvesting. In contrast with the crowdfunding campaigns on Kickstarter where the typical pattern of project support is U-shaped, we 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. We also find evidence for herding behavior. As legislators around the world increasingly regulate crowdinvesting activities, knowing how crowd investors behave under no formal information disclosure provides important insights for issuers, portals, and lawmakers.

Keywords: crowdinvesting; startups; securities issuance; IPO investment dynamics; entrepreneurial finance (search for similar items in EconPapers)
JEL-codes: G11 G20 K22 M13 (search for similar items in EconPapers)
Pages: 47 pages
Date: 2015
New Economics Papers: this item is included in nep-ino
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Citations: View citations in EconPapers (14)

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http://www.uni-trier.de/fileadmin/fb4/prof/VWL/EWF/Research_Papers/2015-09.pdf First version, 2015 (application/pdf)

Related works:
Working Paper: Funding Dynamics in Crowdinvesting (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:trr:wpaper:201509

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