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Success factors in Title II equity crowdfunding in the United States

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  • Stanislav Mamonov
  • Ross Malaga

Abstract

Title II of the JOBS Act has expanded the opportunities for entrepreneurial ventures to raise funds from accredited investors via online equity crowdfunding platforms in the United States. Over $1.4 billion in capital has been committed by the accredited investors in Title II platforms since 2013, yet little is known about how venture characteristics influence the success of raising funds from investors via online equity crowdfunding platforms. Further, it is not known whether online equity crowdfunding is supplementing or replacing traditional venture funding sources. To address these gaps in our knowledge, we draw on research in traditional offline risk capital investments and we evaluate the effects of market, execution and agency risks on equity crowdfunding success by examining 337 ventures that engaged in equity crowdfunding under Title II. We find evidence consistent with investors in online equity crowdfunding platforms giving consideration to all three types of risks. We also find that investors in equity crowdfunding platforms are particularly responsive to the venture ability to attract traditional venture capital funding prior to engaging in equity crowdfunding. These results suggest that online equity crowdfunding platforms are supplementing rather than replacing traditional venture funding sources.

Suggested Citation

  • Stanislav Mamonov & Ross Malaga, 2019. "Success factors in Title II equity crowdfunding in the United States," Venture Capital, Taylor & Francis Journals, vol. 21(2-3), pages 223-241, July.
    • Handle: RePEc:taf:veecee:v:21:y:2019:i:2-3:p:223-241
    DOI: 10.1080/13691066.2018.1468471
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    Cited by:

    1. Austin, Rebekah E. & Dunham, Lee M., 2022. "Do FinTech acquisitions improve the operating performance or risk profiles of acquiring firms?," Journal of Economics and Business, Elsevier, vol. 121(C).
    2. Skare, Marinko & Gavurova, Beata & Polishchuk, Volodymyr, 2023. "A decision-making support model for financing start-up projects by venture capital funds on a crowdfunding platform," Journal of Business Research, Elsevier, vol. 158(C).
    3. Babak Naysary & Siti Nurbaayah Daud, 2021. "Peer to Peer Lending Industry in China and Its Implication on Economic Indicators: Testing the Mediating Impact of SMEs Performance," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 12(2), pages 106-114, April.
    4. Yang Zhao & Xuemei Xie & Liuyong Yang, 0. "Female entrepreneurs and equity crowdfunding: the consequential roles of lead investors and venture stages," International Entrepreneurship and Management Journal, Springer, vol. 0, pages 1-29.
    5. Pau Sendra-Pons & Dolores Garzón & María-Ángeles Revilla-Camacho, 2024. "Catalyzing success in equity crowdfunding: trust-building strategies through signaling," Review of Managerial Science, Springer, vol. 18(9), pages 2699-2721, September.
    6. Suzanne K. Hayes & Bree L. Dority & Sarah J. Borchers, 2020. "Equity Crowdfunding Success: An Examination Of Title Ii Offerings," Review of Economic and Business Studies, Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, issue 25, pages 9-25, June.
    7. Yang Zhao & Xuemei Xie & Liuyong Yang, 2021. "Female entrepreneurs and equity crowdfunding: the consequential roles of lead investors and venture stages," International Entrepreneurship and Management Journal, Springer, vol. 17(3), pages 1183-1211, September.
    8. Campanella, Francesco & Serino, Luana & Battisti, Enrico & Giakoumelou, Anastasia & Karasamani, Isabella, 2023. "FinTech in the financial system: Towards a capital-intensive and high competence human capital reality?," Journal of Business Research, Elsevier, vol. 155(PA).
    9. Sarah Borchers & Lee M. Dunham, 2022. "Tapping of the crowd: The effect of entrepreneur engagement on equity crowdfunding success," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 46(2), pages 324-346, April.
    10. KURIHARA Koki & HONJO Yuji, 2022. "Determinants of Campaign Success: Empirical evidence from equity crowdfunding in Japan," Discussion papers 22057, Research Institute of Economy, Trade and Industry (RIETI).
    11. Khan, Muhammad Zubair & Khan, Zafir Ullah & Hameed, Affan & Zada, Shehnaz Sahib, 2021. "On the upside or flipside: Where is venture capital positioned in the era of digital disruptions?," Technology in Society, Elsevier, vol. 65(C).

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