Does Equity Crowdfunding Democratize Entrepreneurial Finance?
38 Pages Posted: 24 Sep 2018
Date Written: July 1, 2018
Policy-makers expect equity crowdfunding to democratize entrepreneurial finance, by providing access to funding to underrepresented groups of potential entrepreneurs. This paper investigates whether gender, age, ethnicity, and geography affect the choice of equity crowdfunding offerings vs initial public offerings (IPO) on traditional stock markets and whether these characteristics increase the likelihood of a successful offering. Using 167 equity offerings in Crowdcube and 99 equity offerings on London’s Alternative Investment Market raising between 300,000 £ and 5 £m, we find that companies with younger top management team (TMT) members are both more likely to launch equity crowdfunding offerings than IPOs, and have higher chances to successfully complete an equity crowdfunding offering. Remotely located companies are more likely to launch equity crowdfunding offerings than IPOs and have higher chances to successfully complete an equity crowdfunding offering. On the contrary, female entrepreneurs do not have higher chances to raise fund in equity crowdfunding. Minority entrepreneurs do not have higher chances of successfully raising capital but attract a higher number of investors.
JEL Classification: G30
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