Abstract
Equity crowdfunding has been gaining more and more relevance as an alternative way for entrepreneurs to raise capital. This paper examines the impact of retained equity, business angel backing, grants and intellectual property rights on the success of equity crowdfunding. Using data from Crowdcube, one of the leading equity crowdfunding platforms in the world, we obtain 473 pitches within the period from March 2017 to February 2020. We apply three empirical methods to analyse our data set: logistic regression, multiple linear regression and negative binomial regression. By running univariate test and several regression analyses, we find that retained equity has a significantly negative impact on funding success; also, the support of business angels helps entrepreneurs to achieve a funding success. While winning grants is more likely to attract investors, there is no direct evidence associated with funding success. Furthermore, it turns out that intellectual property rights are not relevant for funding success. In an extension, we re-examine our analysis in the light of the Corona crisis by analysing 95 pitches from March to November 2020. We find no structural changes in relevance of the success factors.
Correlation matrix.
| [1] | [2] | [3] | [4] | [5] | [6] | [7] | [8] | [9] | [10] | [11] | [12] | [13] | [14] | [15] | [16] | [17] | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| [1] Success | 1.000 | ||||||||||||||||
| [2] Percentage raised (%) | 0.034 | 1.000 | |||||||||||||||
| [3] Number of backers | −0.127 | −0.021 | 1.000 | ||||||||||||||
| [4] Retained equity (%) | −0.148 | 0.075 | 0.084 | 1.000 | |||||||||||||
| [5] Business angel backing | −0.011 | 0.093 | 0.162 | −0.033 | 1.000 | ||||||||||||
| [6] Grant | 0.052 | 0.115 | 0.007 | −0.015 | 0.123 | 1.000 | |||||||||||
| [7] IPR | 0.004 | 0.019 | 0.042 | 0.073 | 0.077 | 0.029 | 1.000 | ||||||||||
| [8] Target amount in £ | −0.118 | −0.027 | 0.667 | 0.101 | 0.158 | 0.000 | 0.031 | 1.000 | |||||||||
| [9] Pure equity | 0.007 | 0.127 | 0.038 | 0.033 | 0.011 | 0.143 | 0.067 | 0.011 | 1.000 | ||||||||
| [10] Only B shares | 0.006 | 0.029 | 0.100 | 0.091 | 0.171 | −0.071 | 0.058 | 0.201 | −0.035 | 1.000 | |||||||
| [11] No tax break | 0.027 | −0.011 | 0.051 | 0.050 | 0.059 | 0.091 | 0.005 | 0.014 | 0.066 | 0.115 | 1.000 | ||||||
| [12] Age (in days) | 0.099 | 0.014 | 0.095 | 0.112 | 0.084 | 0.077 | 0.013 | 0.175 | 0.016 | 0.100 | 0.014 | 1.000 | |||||
| [13] First sale | 0.102 | 0.007 | 0.011 | 0.010 | 0.055 | 0.018 | 0.133 | 0.002 | 0.033 | 0.016 | 0.014 | 0.038 | 1.000 | ||||
| [14] Awards | 0.052 | 0.025 | −0.013 | 0.017 | 0.048 | 0.027 | 0.071 | 0.016 | −0.170 | 0.132 | −0.122 | 0.112 | 0.048 | 1.000 | |||
| [15] Advisors | 0.041 | −0.041 | 0.055 | −0.096 | 0.013 | 0.037 | −0.096 | −0.022 | 0.026 | −0.087 | −0.046 | −0.052 | 0.056 | 0.003 | 1.000 | ||
| [16] Tech industry | −0.075 | 0.036 | 0.138 | 0.021 | 0.236 | 0.087 | 0.051 | 0.056 | 0.158 | 0.114 | 0.027 | −0.105 | −0.035 | −0.054 | 0.043 | 1.000 | |
| [17] Big city | −0.014 | 0.066 | 0.071 | −0.042 | 0.148 | 0.033 | −0.006 | 0.013 | −0.028 | 0.109 | 0.070 | −0.147 | 0.009 | −0.035 | −0.040 | 0.103 | 1.000 |
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