Equity Crowdfunding in Germany and the UK: Follow-Up Funding and Firm Failure

Today, startups often obtain financing via the Internet through many small contributions of non-sophisticated investors. Yet little is known about whether these startups can ultimately build enduring businesses. In this article, we hand-collected data from 14 different equity crowdfunding (ECF) portals and 426 firms that ran at least one successful ECF campaign in Germany or the United Kingdom. We empirically analyze different factors affecting follow-up funding and firm failure. The findings show that German firms that received ECF stood a higher chance of obtaining follow-up funding through business angels or venture capitalists, but also had a higher likelihood of failure. The number of senior managers, subsequent successful ECF campaigns, and the number of venture capital investors all had a positive impact on obtaining post-campaign financing, while firm age had a negative impact. Subsequent successful ECF campaigns were significant predictors decreasing firm failure.

Keywords: Equity Crowdfunding; Follow-Up Funding; Firm Survival

JEL Classification: G24; M13

Suggested Citation: Suggested Citation

Hornuf, Lars and Schmitt, Matthias and Stenzhorn, Eliza, Equity Crowdfunding in Germany and the UK: Follow-Up Funding and Firm Failure (January 30, 2018). In: Corporate Governance: An International Review, Special Issue, 2018, pp. 331-354, CESifo Working Paper Series No. 6642, Max Planck Institute for Innovation & Competition Research Paper No. 17-09, Available at SSRN: https://ssrn.com/abstract=3020820 or http://dx.doi.org/10.2139/ssrn.3020820