Follow-On Equity Crowdfunding

38 Pages Posted: 15 Aug 2018

See all articles by Jerry Coakley

Jerry Coakley

University of Essex - Essex Business School

Aristogenis Lazos

University of Essex

José Manuel Liñares-Zegarra

University of Essex - Essex Business School

Multiple version iconThere are 2 versions of this paper

Date Written: July 31, 2018

Abstract

Equity crowdfunding (ECF) provides outside equity to unlisted and mainly early stage entrepreneurial firms and the UK is the leading ECF market. This paper investigates the determinants of first follow-on campaigns and of their probability of success for a sample of 790 firms that conducted an initial campaign on one of the three major UK platforms – Crowdcube, Seedrs, and SyndicateRoom – over the 2011-2017 period. Among these, some 106 sample firms conducted a first follow-on campaign. Our two stage Heckman results show that the probability of conducting a first follow-on campaign is positively impacted by novel platform and campaign characteristics such as overfunding on the initial campaign, campaigns with a lead investor, and those with a nominee account structure protecting all crowdfunding shareholder rights. The paper investigates for the first time the determinants of a successful first follow-on campaign. The probability of the latter is positively impacted by the degree of overfunding on the initial campaign and by the related social capital that initial campaign success garners. The probability of success also increases with the ratio of the initial capital raised relative to the follow-on target capital. The implication is that the capital raised in the initial campaign acts as a reference point for the follow-on target capital.

Keywords: entrepreneurial finance; crowdfunding platforms; overfunding

JEL Classification: G240, M130

Suggested Citation

Coakley, Jerry and Lazos, Aristogenis and Linares-Zegarra, Jose Manuel, Follow-On Equity Crowdfunding (July 31, 2018). Available at SSRN: https://ssrn.com/abstract=3224106 or http://dx.doi.org/10.2139/ssrn.3224106

Jerry Coakley (Contact Author)

University of Essex - Essex Business School ( email )

Wivenhoe Park
Colchester, CO4 3SQ
United Kingdom
+44 1206 872455 (Phone)
+44 1206 873429 (Fax)

HOME PAGE: http://www.essex.ac.uk/afm/staff/coakley.shtm

Aristogenis Lazos

University of Essex ( email )

Wivenhoe Park
Colchester, CO4 3SQ
United Kingdom

Jose Manuel Linares-Zegarra

University of Essex - Essex Business School ( email )

Wivenhoe Park
Colchester, CO4 3SQ
United Kingdom

HOME PAGE: http://www.essex.ac.uk/ebs/staff/profile.aspx?ID=4474

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