Equity Crowdfunding in the U.S.

49 Pages Posted: 5 Oct 2021

See all articles by Iman Dolatabadi

Iman Dolatabadi

University of Texas at Austin

Cesare Fracassi

University of Texas at Austin; Coinbase Institute

Lin Yang

University of Texas at Austin

Date Written: October 1, 2021


We assess the impact of the 2012 JOBS Act equity crowdfunding legislation that allows U.S.non-accredited investors to invest in private small businesses through online portals. The goals of new regulation were to spur small business growth and democratize investment in private startups by increasing access to capital. We find that the evidence is mixed:on the one hand, crowdfunding seems to expand access to finance to small business by targeting firms that are not usually served by institutional investors like angel and venture capital. Furthermore, having a successful crowdfunding campaign has a causal positive effect on future firm performance relative to a failed campaign. On the other hand, the equity crowdfunding market faces severe adverse selection that limit the expansion of this new form of business financing. Moreover, relative to angel-backed firms, successfully crowdfunded firms are less likely to progress through the financing funnel and thus provide exit to investors.

Keywords: Crowdfunding, JOBS Act

JEL Classification: G24,G18

Suggested Citation

Dolatabadi, Iman and Fracassi, Cesare and Yang, Lin, Equity Crowdfunding in the U.S. (October 1, 2021). Available at SSRN: https://ssrn.com/abstract=3934662 or http://dx.doi.org/10.2139/ssrn.3934662

Iman Dolatabadi

University of Texas at Austin ( email )

United States

Cesare Fracassi (Contact Author)

University of Texas at Austin ( email )

McCombs School of Business
2110 Speedway Stop B6600
Austin, TX 78712-1276
United States
512-232-6843 (Phone)

HOME PAGE: http://https://faculty.mccombs.utexas.edu/cesare.fracassi/

Coinbase Institute ( email )

Lin Yang

University of Texas at Austin ( email )

2100 Speedway
Austin, TX 78705
United States

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