Is equity crowdfunding always good? Deal structure and the attraction of venture capital investors |
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| Institution: | 1. School of Management, Politecnico di Milano, Via Lambruschini 4/b, Milano 20156, Italy;2. Trinity Business School, Trinity College Dublin, the University of Dublin, Dublin, Ireland;1. Fordham University, 45 Columbus Avenue, New York, NY 10023, United States;2. Bank of Finland, Finland;3. University of Sydney, Australia;4. Alliance Manchester Business School, University of Manchester, Manchester M15 6PB, United Kingdom;5. University of Cranfield, Cranfield School of Management, Cranfield L69 MK43 0AL, United Kingdom;1. Faculty of Economics and Business Administration, Ghent University, Sint-Pietersplein 7, 9000 Gent, Belgium;2. SKEMA Business School—Université Côte d’Azur, SKEMA Business School, Department of Finance and Accounting, Avenue Willy Brandt, 59777 Euralille, France;1. University of Bremen, Business Studies & Economics, Hochschulring 4, 28359 Bremen, Germany;2. Max Planck Institute for Innovation and Competition, Marstallplatz 1, 80539 Munich, Germany;3. CESifo, Poschingerstraße 5, 81679 Munich, Germany;4. SKEMA Business School—Université Côte d''Azur, SKEMA Business School, Lille Campus, Department of Finance and Accounting, Avenue Willy Brandt, F – 59777 Euralille, France |
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| Abstract: | This paper provides evidence that equity crowdfunding has implications for firms long after the capital raised through the campaign is injected. Using a unique dataset of 290 firms that successfully fundraised via the two most prominent UK equity crowdfunding portals, we examine how different shareholder structures, namely the nominee vs. the direct shareholder structure, affect the attraction of venture capital financing. From the comparison with a control group of twin firms that did not receive any external seed financing, we find that a successful equity crowdfunding campaign facilitates the attraction of VC financing. This association is stronger for equity crowdfunding campaigns with a nominee shareholder structure, while it results weaker when the direct shareholder structure is chosen. Compared to a different control sample of angel-backed firms, receiving equity crowdfunding through a nominee structure facilitates the attraction of VC financing. |
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