Testing-the-Waters Policy With Hypothetical Investment: Evidence From Equity Crowdfunding

International audience; Digitization has enabled “testing-the-waters” in entrepreneurial finance whereby investors can make nonbinding commitments in equity crowdfunding prior to an actual campaign to ascertain interest in the project. We consider whether these nonbinding equity investment commitments are informative about actual investments during the campaign and, thus, ultimate startup funding success. The data indicate that only 18% of nonbinding commitments are, in fact, invested. The evidence is consistent with hypothetical bias. Hypothetical bias is significantly less pronounced among women and among investors living in higher income areas or in areas with higher levels of education.…

Determinants of Individual Investment Decisions in Investment-Based Crowdfunding

We investigate determinants of investment decisions in investment-based (equity and real estate) crowdfunding, using a novel investment-, investor- and campaign-level database. We find that this market is a man's world, with nearly 93% of investments made by men. Consistent with behavioral and finance theories, we find that women invest less in the riskiest investments but more in safer ones. Further analyses show that these findings are better explained by differences in risk aversion than differences in overconfidence between men and women. Investors located in an area considered more "sociable" (socially friendly) also invest more, but only if the investor is a woman. Overall, the findin…

Hypothetical Investment Bias

Young, entrepreneurial firms are particularly dependent on external investors to sustain their development. Are non-binding equity investment commitments informative? Our large sample evidence in the context of equity crowdfunding shows that only 18% of non-binding commitments made by investors in entrepreneurial firms are actually invested. The evidence is consistent with hypothetical bias. Hypothetical bias is significantly less pronounced among women, and among investors with greater social capital, proxied by education and wealth. While investment intentions are only partially reliable at the individual level, the aggregate amount of collected investment intentions is a strong predictor…

Identifying Start-Up Success : Testing-The-Waters Policy with Hypothetical Investment

International audience

Supplementary Material 1 - Supplemental material for Testing-the-Waters Policy With Hypothetical Investment: Evidence From Equity Crowdfunding

Supplemental material, Supplementary Material 1, for Testing-the-Waters Policy With Hypothetical Investment: Evidence From Equity Crowdfunding by Douglas Cumming, Fabrice Hervé, Elodie Manthé and Armin Schwienbacher in Entrepreneurship Theory and Practice

Voting in Equity Crowdfunding Projects

CROWDFUNDING AND INNOVATION

Entrepreneurs have started relying on crowdfunding to fund their investments. This paper surveys the literature linking crowdfunding with innovation in entrepreneurial firms. Two distinct areas are discussed. First, crowdfunding has the potential to foster innovation by offering new sources of capital to innovation‐driven firms and thereby reduce the funding gap for innovative startups. Second, crowdfunding offers a way for the crowd to participate in the innovation process by providing feedback to the entrepreneur. This feedback can take various forms, including providing ideas on the development of the product during and after the campaign (in the spirit of crowdsourcing), and providing v…

Investissement en equity crowdfunding : comment « jauger » un projet (et pourquoi WiSEED n’affiche pas le montant collecté) ?

Do Crowdfunders Prefer Round Numbers?

Le crowdfunding favorise-t-il l’innovation ?

Thème du congrès : Les enjeux de l’innovation : quelles politiques ?, quelles gouvernances ?; International audience

Hypothetical bias in equity crowdfunding

International audience; Young, entrepreneurial firms are particularly dependent on external investors to sustain their development. Are non-binding equity investment commitments informative? Our large sample evidence in the context of equity crowdfunding shows that only 18% of non-binding commitments made by investors in entrepreneurial firms are actually invested. The evidence is consistent with hypothetical bias. Hypothetical bias is significantly less pronounced among women, and among investors with greater social capital, proxied by education and wealth. While investment intentions are only partially reliable at the individual level, the aggregate amount of collected investment intentio…