A recent study shows that companies founded via equity crowdfunding have 8.5% higher failure rates than companies which raise capital in more traditional ways.
The research, published by Corporate Governance An International Review, analysed data from platforms Crowdcube and Seedrs.
Additional findings include that equity crowdfunded firms financed through a nominee structure make smaller losses while firms financed through a direct shareholder structure have more new patent applications, including foreign patent applications.
Authors argue that:
For policy makers and crowdfunding platforms, investor protection against adverse selection will be important to ensure the sustainability of equity crowdfunding markets.
Delivered by researchers from Ghent University, Vlerick Business School and Katholieke Universiteit Leuven, the study is one of the first to focus on the outcomes of equity crowdfunding.
Find out more here.
Oliver* 