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

Abstract

This study examines how crowdfunding (relative to angel investing) influences subsequent venture capital (VC) investments for startups. After addressing the potential endogeneity using a bivariate Probit model with the propensity score matching, we find that crowdfunded startups and angel-backed startups have no statistically significant difference in receiving subsequent venture capital investments. Furthermore, corporate venture capitalists (CVCs) tend to favor crowdfunded startups, while independent venture capitalists (IVCs) prefer angel-funded startups. Startups that have traditionally been neglected fail to overcome the disadvantage in obtaining subsequent VC investments, even after successful crowdfunding campaigns. Important implications for the role of crowdfunding in the startup finance ecosystem are discussed. .

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