Following the Crowd—Does Crowdfunding Affect Venture Capitalists’ Selection of Entrepreneurial Ventures?

21 Pages Posted: 28 May 2020

See all articles by Ferdinand Thies

Ferdinand Thies

Hochschule Liechtenstein

Alexander Huber

affiliation not provided to SSRN

Carolin Bock

Technische Universität Darmstadt

Alexander Benlian

Darmstadt University of Technology

Sascha Kraus

Hochschule Liechtenstein

Date Written: October 2019

Abstract

Given the increasing popularity of crowdfunding as a new means to finance entrepreneurial ventures, we assess whether and how crowdfunding campaign‐specific signals that affect campaign success influence venture capitalists’ selection decisions in ventures’ follow‐up funding process. Our study relies on cross‐referencing a proprietary data set of 56,000 crowdfunding campaigns that ran on Kickstarter between 2009 and 2016 with 100,000 investments in the same period from the Crunchbase data set. Drawing on signaling theory and the microfinance literature, our empirical findings reveal that a successful crowdfunding campaign leads to a higher likelihood to receive follow‐up venture capital (VC) financing, and that there exists an inverted U‐shaped relationship between the funding‐ratio and the probability to receive VC funding. Further, we find statistical evidence that an endorsement by the platform provider has a likewise positive impact on the receipt of VC. Contrary to our expectations, word‐of‐mouth volume seems to be a negligible factor when it comes to follow‐up VC financing. Our results support the view that crowdfunding signals are factored into the VC’s funding decision in order to evaluate the potential of entrepreneurial ventures.

Suggested Citation

Thies, Ferdinand and Huber, Alexander and Bock, Carolin and Benlian, Alexander and Kraus, Sascha, Following the Crowd—Does Crowdfunding Affect Venture Capitalists’ Selection of Entrepreneurial Ventures? (October 2019). Journal of Small Business Management, Vol. 57, Issue 4, pp. 1378-1398, 2019, Available at SSRN: https://ssrn.com/abstract=3612189 or http://dx.doi.org/10.1111/jsbm.12447

Ferdinand Thies (Contact Author)

Hochschule Liechtenstein

Fürst Franz Josef Strasse
Vaduz, 9490
Liechtenstein

Alexander Huber

affiliation not provided to SSRN

No Address Available

Carolin Bock

Technische Universität Darmstadt ( email )

Hochschulstr. 1
Darmstadt, 64289
Germany

HOME PAGE: http://www.ent.tu-darmstadt.de

Alexander Benlian

Darmstadt University of Technology ( email )

Universitaets- und Landesbibliothek Darmstadt
Magdalenenstrasse 8
Darmstadt, Hesse D-64289
Germany

Sascha Kraus

Hochschule Liechtenstein ( email )

Fürst Franz Josef Strasse
Vaduz, 9490
Liechtenstein

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