Equity Crowdfunding and Offering Page Disclosure

Abstract

Regulation Crowdfunding opened up investment in startup firms to non-accredited investors in 2016 as part of the JOBS Act of 2012. This paper provides descriptive evidence about how these startup firms communicate with these investors on their Regulation Crowdfunding offering page. I find evidence, consistent with prior theory about processing costs and information salience, that a firm’s prior revenues relate strongly to the discussion of financial information on its offering page, despite indication from Reg CF founders that they think financial information is of less importance to these investors than other information about the company. In addition to disclosure of financial information, these offering pages include a number of other elements, including a discussion of how firms intend to use the raised funds, a history of the company, FAQs, and various audio-visual elements. Consistent with founder beliefs that investors place little weight on firm financials, I find no consistent relation between financial disclosure and a firm meeting its offering goal. Offering success appears more closely related to other elements of offering page disclosure that help tell the “story” of the company. The results of this paper can help inform future research in the Equity Crowdfunding space, as well as contribute to the literature on how investors process, firms think about, information and disclosure.

Keywords: Equity Crowdfunding, Regulation Crowdfunding, Voluntary Disclosure

JEL Classification: G23, G24, M13, M41