Digital equity and government support during COVID-19

Shabnam Kazembalaghi (), Jerry Coakley (), José M. Liñares-Zegarra () and Silvio Vismara ()
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Shabnam Kazembalaghi: University of Essex
Jerry Coakley: University of Essex
José M. Liñares-Zegarra: University of Essex
Silvio Vismara: University of Bergamo

Small Business Economics, 2025, vol. 64, issue 4, No 6, 1679-1705

Abstract: Abstract The advent of COVID-19 portended a dire liquidity crunch for small firms as traditional external funding sources were severely curtailed. Defying expectations, initial equity crowdfunding (ECF) campaigns not only withstood the pandemic’s onslaught but also saw unprecedented growth in funding volume, investor participation and overfunding. The upshot was that external equity, the traditional funding of last resort, became the first choice. Increased ECF funding especially for seed ventures are likely linked to government-backed loan guarantee schemes that acted as a quality signal for investors. The paper highlights the unanticipated positive synergies between public support mechanisms and private equity dynamics where equity was funding of first choice for many small firms seeking external funding. These developments underscore ECF’s central role in digitally channelling equity capital to small firms during a period of heightened economic uncertainty.

Keywords: Equity crowdfunding; COVID-19; Digital finance; Seed firms (search for similar items in EconPapers)
JEL-codes: E44 G01 G18 G38 L26 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s11187-024-00961-9

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