Crowd-Based Feedback and Early-Stage Entrepreneurship Performance: Evidence from a Digital Platform

41 Pages Posted: 22 Mar 2021 Last revised: 21 Dec 2021

See all articles by Aurelien Quignon

Aurelien Quignon

Universite du Luxembourg - Department of Economics

Date Written: November 2021

Abstract

The ability to identify early-stage venture potential, which has traditionally relied on experts, is challenging due to the uncertainty of new ideas. However, an alternative judgment from a large number of evaluators can effectively identify promising ventures. This paper empirically studies whether crowd-based information generates informative feedback for entrepreneurs as well as seed investors. Using data on about 701 early-stage founders of new ventures examined by 2,600 evaluators, I estimate the effects of crowd-based ratings on survival and securing seed funds. I find that the rating from the crowd is uncorrelated with subsequent financing events from seed investors but increases a venture’s probability of continuation by 3.1 percentage points. This effect becomes stronger as the number of evaluators increases. This highlights that the aggregation of judgments offers information for nascent founders of ventures.

Keywords: Crowd rating; Entrepreneurial uncertainty; Feedback; Early-stage ventures

JEL Classification: G24; L26; M13; O31

Suggested Citation

Quignon, Aurelien, Crowd-Based Feedback and Early-Stage Entrepreneurship Performance: Evidence from a Digital Platform (November 2021). Available at SSRN: https://ssrn.com/abstract=3802679 or http://dx.doi.org/10.2139/ssrn.3802679

Aurelien Quignon (Contact Author)

Universite du Luxembourg - Department of Economics ( email )

Luxembourg

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