Success factors in Title III equity crowdfunding in the United States

Research output: Contribution to journalArticle

6 Citations (Scopus)

Abstract

The financial industry is seeing rapid introduction of new technologies and new business models that are challenging established practices. Recent changes in financial regulation in the United States have spurred evolution of equity crowdfunding as a potential alternative to traditional sources of venture capital. To address the relative lack of knowledge about success factors, we focus on Title III equity crowdfunding platforms in the United States that are open to non-accredited investors. We draw on traditional venture finance research and we examine the effects of market, execution and agency risks in equity crowdfunding under Title III. We collect data on 133 ventures that attracted more than $11 million in funding commitments across sixteen Title III equity crowdfunding platforms. We find that all three types of risks can affect the likelihood of successful fundraising under Title III. We discuss the implications of these findings for entrepreneurs, investors, crowdfunding platforms and policy makers.

Original languageEnglish
Pages (from-to)65-73
Number of pages9
JournalElectronic Commerce Research and Applications
Volume27
DOIs
StatePublished - 1 Jan 2018

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Finance
Industry
Equity
Success factors
Venture
Investors
Funding
Venture capital
Fund raising
Business model
Financial industry
Politicians
Entrepreneurs
New business
Financial regulation

Keywords

  • Crowdfunding
  • Equity crowdfunding
  • Fintech innovation
  • JOBS Act
  • Risk capital
  • Title III

Cite this

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abstract = "The financial industry is seeing rapid introduction of new technologies and new business models that are challenging established practices. Recent changes in financial regulation in the United States have spurred evolution of equity crowdfunding as a potential alternative to traditional sources of venture capital. To address the relative lack of knowledge about success factors, we focus on Title III equity crowdfunding platforms in the United States that are open to non-accredited investors. We draw on traditional venture finance research and we examine the effects of market, execution and agency risks in equity crowdfunding under Title III. We collect data on 133 ventures that attracted more than $11 million in funding commitments across sixteen Title III equity crowdfunding platforms. We find that all three types of risks can affect the likelihood of successful fundraising under Title III. We discuss the implications of these findings for entrepreneurs, investors, crowdfunding platforms and policy makers.",
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