Uncovering the Outcomes of Equity Crowdfunding - Post-funding outcomes of equity crowdfunded firms in Europe

Abstract: The aim of this study is to explore the previously unresearched outcomes of firms funded through equity crowdfunding, a novel type of entrepreneurial finance. We study the outcomes of a sample of 337 firms funded on equity crowdfunding platforms in Europe between 2009 and 2014. By incorporating a descriptive statistics analysis, we discover the post-funding outcomes of the firms and complement this by a regression analysis in order to assess whether those outcomes can be attributed to equity crowdfunding campaign-related factors. A main finding is that the firms experience on average a peak in both sales and sales growth the year after the campaign and that this tends to be positively impacted by a larger number of investors through the campaign. Profit is on average found to decrease the years following the campaign, but with a less negative growth rate. The latter is positively impacted from having business angels investing through the campaign and a higher equity share offered. A similar pattern to those growth outcomes has been found when comparing the equity crowdfunded firms to firms funded by business angels, supporting the idea that business angel investing can be seen as an analogue to equity crowdfunding. We find that another common outcome is a PR effect, which is also positively impacted by the number of investors, and supports previous findings on crowdfunding showing that campaigns act as a marketing and promotional tool for firms.