My research interests are in the areas of crowdfunding, venture capital, corporate venture capital, and strategic entrepreneurship.
Do investors’ moods influence their contributions to risky investments in equity crowdfunding? Yes. We use cloud cover as a proxy for mood because besides serving as powerful mood stimulus, changes in weather are plausibly exogenous and orthogonal to attributes of crowdfunding campaigns, yielding an advantageous identification strategy. Our results, based on data from Companisto – one of the largest European equity crowdfunding platforms, indicate that change in sky cloud cover from zero to full reduces each investor’s contribution amount by about 10-15% (across different specifications). Our paper highlights the broader role of financiers’ moods and emotions in providing valuable financial resources to entrepreneurs.
What has boosted crowdfunding’s growth? In the case of peer-to-peer (P2P) lending, we highlight the role of consumers’ distrust in banks. We offer evidence that distrust in banks likely triggers individuals to supply funding toward crowdfunding and away from bank deposits. We highlight that a distrust mindset promotes questioning default choices and considering alternatives, and fosters comparisons focusing on dissimilarities. Findings suggest US states whose residents express greater distrust in banks are more likely to fund P2P loans and, conditional on funding, lend higher amounts. This relationship is more pronounced when funding small loans or borrowers with less banking access.
Reward-based crowdfunding not only provides finance to entrepreneurs but also generates valuable information on their products’ potential demand, their feasibility, and customers’ satisfaction. This study investigates how information from the campaigns, relating to the funding amount raised in excess of target capital, delays (if any) in product delivery, and crowd sentiment, influences the chances that a venture receives equity capital from professional investors in the aftermath of a campaign. To build a sample of ventures at risk of obtaining equity capital from professional investors, we focus on 300 successful hardware campaigns that have raised $100,000 or more on Kickstarter and Indiegogo. Our results indicate that the information provided by crowdfunding campaigns influences the odds of receiving external equity in the aftermath of the campaign; however, this relationship depends on whether the ventures have already backing from professional investors or not. Our study offers insights into what information professional investors use to assess crowdfunded ventures.
Equity crowdfunding can provide significant resources to new ventures. However, it is not clear how crowd investors decide which ventures to invest in. Building on prior work on professional investors as well as theories in behavioral decision-making, we examine the weight non-professional crowd investors place on criteria related to a start-up’s management, business, and financials. Our conceptual discussion raises the possibility that crowd investors often lack the experience and training to assess complex and sometimes-technical investment information, potentially leading them to place larger weight on factors that appear easy to evaluate and less weight on factors that are more difficult to evaluate. Studying over 200 campaigns on the platform Crowdcube, we find that fundraising success is most strongly related to attributes of the product or service, followed by selected aspects of the team, in particular, founders’ motivation and commitment. However, financial metrics disclosed in campaign descriptions do not predict funding success. We discuss implications for investors, entrepreneurs, as well as platform organizers and policy makers.
Forming early relationships increases entrepreneurial ventures’ chances of survival and success by allowing access to critical resources from partners. However, since not all ventures achieve their desired goals through collaboration due to uncertainty, such relationships are sometimes abandoned. This paper investigates the costs of ties that have gone awry in the context of venture capital investments. We conjecture that the adverse perceptions of signals associated with tie discontinuation reduce an investee venture’s valuation in the follow-on round of financing by partially deterring prospective investors, particularly higher-quality ones, from joining the syndicate. By examining large-sample evidence that supports our theory, we suggest that early entrepreneurial ties to venture capitalists may be a double-edged sword, especially in light of the costs of tie discontinuation.
Crowdfunding has gained traction as a mechanism to raise resources for entrepreneurial and artistic projects, yet there is little systematic evidence on the potential of crowdfunding for scientific research. We first briefly review prior research on crowdfunding and give an overview of dedicated platforms for crowdfunding research. We then analyze data from over 700 campaigns on the largest dedicated platform, Experiment.com. Our descriptive analysis provides insights regarding the creators seeking funding, the projects they are seeking funding for, and the campaigns themselves. We then examine how these characteristics relate to fundraising success. The findings highlight important differences between crowdfunding and traditional funding mechanisms for research, including high use by students and other junior investigators but also relatively small project size. Junior investigators are more likely to succeed than senior scientists, and women have higher success rates than men. Conventional signals of quality – including scientists’ prior publications – have little relationship with funding success, suggesting that the crowd may apply different decision criteria than traditional funding agencies. Our results highlight significant opportunities for crowdfunding in the context of science while also pointing towards unique challenges. We relate our findings to research on the economics of science and on crowdfunding, and we discuss connections with other emerging mechanisms to involve the public in scientific research.
We investigate firms' pre-IPO corporate activity. We find that firms involved in extraordinary – i.e., beyond momentum – amounts of acquisitions, JVs, and alliances in the year leading up to their IPOs (1) are more likely to engage in post-IPO corporate activity; and (2) enter into their first post-IPO transaction twice as fast as other firms. Our results indicate that signaling via extraordinary corporate activity can have a significant effect on entrepreneurial firms’ growth. The implications are discussed.
This paper investigates gender differences in the behavior of investors in firms seeking equity financing. Using data from Swedish equity crowdfunding platform– FundedByMe, we find that female investors are less likely to invest in the equity of younger firms, high-technology firms, and firms with a higher percentage of equity offerings. This pattern seems consistent with a greater risk-aversion in female investors compared to male investors. Furthermore, female investors are more likely to invest in projects in which the proportion of male investors is higher.
This study replicates Dushnitsky and Shaver (2009) and examines the conditions that facilitate inter-organizational relationships. We consider the role played by legal defenses in encouraging the formation of ties between new ventures and same-industry corporate venture capitalists, and we enrich our analysis by considering timing and social defenses, as suggested in the “swimming with sharks” literature. Whereas all prior findings have been based on data on U.S. new ventures, we assess the effectiveness of these defenses in a different institutional setting, i.e. the European venture capital market. Legal defenses in Europe are shown to be as effective as they are in the U.S., social defenses are effective only as a complement to legal defenses, and timing defenses are ineffective.
We investigate how public policies related to product market regulation (PMR) influence the ability of European young venture-capital (VC) backed firms compared to a sample of matched non-VC backed firms to grow in size in proportion to their innovative activity. Whereas VCs can presumably offer value-added services to overcome the regulatory constraints of PMR, we find that VC-backed firms relative to non-VC backed ones are more adversely sensitive to these policies. This evidence indicates that PMR impedes the most VC-backed firms’ high- potential for innovation-driven growth.