EconPapers    
Economics at your fingertips  
 

New technology assessment in entrepreneurial financing – Does crowdfunding predict venture capital investments?

Jermain Kaminski, Christian Hopp and Tereza Tykvová

Technological Forecasting and Social Change, 2019, vol. 139, issue C, 287-302

Abstract: Crowdfunding is a relatively new gateway for entrepreneurs to access capital for creative and innovative ideas. It allows individuals to start experiments with new products and technologies where the outcome is distant. Yet predicting the success of hitherto unseen products and technologies is fraught with ambiguity and uncertainty. Early stage product experimentation and market access through reward-based crowdfunding, where potential customers provide funds for new unproven products, can therefore provide quality signals to subsequent financiers of new technologies. Our study investigates whether there is a long-run relationship between crowdfunding and VC investments on the aggregate and the industry level. We draw on a dataset covering 77,654 projects that successfully raised funds on Kickstarter and 3260 VC investments in the US between 2012 and 2017. The results suggest that crowdfunding Granger causes VC investments. Moreover, the monthly crowdfunding and VC investment time series are cointegrated. We therefore conclude that successful crowdfunding campaigns lead to a subsequent increase in VC investments. This holds at the aggregate level and particularly for hardware and consumer electronics, as well as fashion. These results enhance our understanding of the co-development between crowdfunding and VC investments. Reward-based crowdfunding helps VC investors in assessing future trends rather than crowding them out of the market.

Keywords: Technology prediction; Granger causality; Reward-based crowdfunding; Venture capital (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations Track citations by RSS feed

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0040162517301440
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:tefoso:v:139:y:2019:i:c:p:287-302

Access Statistics for this article

Technological Forecasting and Social Change is currently edited by Fred Phillips

More articles in Technological Forecasting and Social Change from Elsevier
Bibliographic data for series maintained by Dana Niculescu ().

 
Page updated 2019-01-19
Handle: RePEc:eee:tefoso:v:139:y:2019:i:c:p:287-302