Success Factors in Title II Equity Crowdfunding in the United States
Abstract
Equity-based crowdfunding is a growing global phenomenon, however little is known about the factors that may affect venture fundraising success in equity crowdfunding platforms in the United States. We develop a novel theoretical framework for understanding equity crowdfunding success by drawing on research in traditional risk capital investments that emphasizes market, execution and agency risks as the key determinants of investment decisions. We expand the framework to include computer-mediated communication challenges that can arise in internet-based equity crowdfunding. We evaluate the framework using data from a leading equity crowdfunding platform in the United States. We find that investors appear to focus on the market and agency risks in screening the potential investments in equity crowdfunding platforms. We also find that the use of video narratives by the entrepreneurs is positively correlated with equity crowdfunding success.