The Role of Due Diligence in Crowdfunding Platforms
50 Pages Posted: 9 Dec 2016 Last revised: 12 Sep 2019
Date Written: March 31, 2018
Crowdfunding platform due diligence comprises background checks, site visits, credit checks, cross-checks, account monitoring, and third party proof on funding projects. We evaluate the factors associated with platforms’ compliance expenses, and their due diligence application. We find that due diligence is related to legislation requirement, platform size, and type or complexity of crowdfunding campaigns. In addition, we find that platforms applying due diligence provide more services to project issuers and funders. Furthermore, due diligence is associated with higher percentage of successful campaigns, more fund contributors, and larger amount of capital raised on platforms. Our analyses are supported by platform-level data, covering the period 2014-2017.
Keywords: crowdfunding, entrepreneurship, intermediaries
JEL Classification: G23, G24, L26
Suggested Citation: Suggested Citation