Crowdfunding Success Effects on Financing Outcomes for Startups: A Signaling Theory Perspective

MIS Quarterly (Accepted)

63 Pages Posted: 22 Mar 2017 Last revised: 2 Sep 2023

See all articles by Sunghan Ryu

Sunghan Ryu

USC-SJTU Institute of Cultural and Creative Industry, Shanghai Jiao Tong University

Keongtae Kim

The Chinese University of Hong Kong

Jungpil Hahn

National University of Singapore (NUS) - Department of Information Systems and Analytics

Date Written: July 29, 2022

Abstract

This study adopts a signaling theory perspective to examine whether and how crowdfunding (relative to angel financing) influences subsequent venture capital (VC) investments in startups. We used a bivariate probit model with propensity score matching to address the potential endogeneity of the initial funding choice. Subsequently, we found that crowdfunded startups have a lower chance of receiving VC funding than angel-financed startups. Furthermore, the effect is more negative for startups located outside of startup cluster cities. Finally, we showed that corporate VCs, unlike independent VCs comprising the majority of VCs, favor crowdfunded startups. Our study contributes to the literature on crowdfunding, startup finance, and the transformative effects of IT-enabled platforms. This study further discusses the practical implications of crowdfunding in startup finance ecosystems.

Keywords: Crowdfunding, angel, start-up, venture capitalists, corporate venture capitalist, signaling theory

Suggested Citation

Ryu, Sunghan and Kim, Keongtae and Hahn, Jungpil, Crowdfunding Success Effects on Financing Outcomes for Startups: A Signaling Theory Perspective (July 29, 2022). MIS Quarterly (Accepted), Available at SSRN: https://ssrn.com/abstract=2938285 or http://dx.doi.org/10.2139/ssrn.2938285

Sunghan Ryu (Contact Author)

USC-SJTU Institute of Cultural and Creative Industry, Shanghai Jiao Tong University ( email )

Shanghai
China

Keongtae Kim

The Chinese University of Hong Kong ( email )

908 Cheng Yu Tung Building, Chinese Univ of HK
Shatin, 11111
Hong Kong
39439284 (Phone)

Jungpil Hahn

National University of Singapore (NUS) - Department of Information Systems and Analytics ( email )

Singapore

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