Does Equity Crowdfunding Democratize Entrepreneurial Finance?

38 Pages Posted: 4 Dec 2018

See all articles by Douglas J. Cumming

Douglas J. Cumming

Florida Atlantic University

Silvio Vismara

University of Bergamo

Michele Meoli

University of Bergamo

Date Written: November 9, 2018

Abstract

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 £5m, 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 funds in equity crowdfunding. Minority entrepreneurs do not have higher chances of successfully raising capital but do attract a higher number of investors. Overall, our evidence provides empirical guidance for the first time to the oft-repeated policy claim that equity crowdfunding democratizes entrepreneurial finance by providing access to funding to underrepresented groups of potential entrepreneurs.

Keywords: crowdfunding, equity crowdfunding, entrepreneurial finance, democratizaion, gender, geography, investment crowdfunding

JEL Classification: G30

Suggested Citation

Cumming, Douglas J. and Vismara, Silvio and Meoli, Michele, Does Equity Crowdfunding Democratize Entrepreneurial Finance? (November 9, 2018). Available at SSRN: https://ssrn.com/abstract=3281727 or http://dx.doi.org/10.2139/ssrn.3281727

Douglas J. Cumming

Florida Atlantic University ( email )

777 Glades Rd
Boca Raton, FL 33431
United States

HOME PAGE: http://booksite.elsevier.com/9780124095373/

Silvio Vismara (Contact Author)

University of Bergamo ( email )

Via Marconi 5
24044 Dalmine, Bergamo
Italy
00390352052352 (Phone)
0039035562779 (Fax)

Michele Meoli

University of Bergamo ( email )

Via Marconi 5
24044 Dalmine, Bergamo
Italy
+390352052026 (Phone)
+390352052077 (Fax)

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