Raising Capital Under Demand Uncertainty

42 Pages Posted: 30 Jan 2020 Last revised: 28 Jan 2021

See all articles by Spyros Terovitis

Spyros Terovitis

University of Amsterdam, Finance Group

Date Written: June 1, 2019


We study an environment where an entrepreneur seeks capital to finance the development of a new product whose future demand is uncertain. We explore how the entrepreneur can capitalize on the information generated by potential investors. Under the optimal contract (i) investors take their backing decisions sequentially, and (ii) the project is financed only if it receives enough financial support; otherwise, the entrepreneur does not raise capital. Our work provides testable insights for security-based crowdfunding that help us understand its economic value and the conditions under which it can be a valuable method of financing.

Keywords: Information Aggregation, Crowdfunding, Learning, Uncertainty

JEL Classification: D82, D83, G32

Suggested Citation

Terovitis, Spyros, Raising Capital Under Demand Uncertainty (June 1, 2019). Available at SSRN: https://ssrn.com/abstract=3514470 or http://dx.doi.org/10.2139/ssrn.3514470

Spyros Terovitis (Contact Author)

University of Amsterdam, Finance Group ( email )

M3.04, Amsterdam Business School
Plantage Muidergracht 12
Amsterdam, 1018TV

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
PlumX Metrics