Crowdfunding and Venture Capital: Substitutes or Complements?

Abstract

The authors study the geographical and time series dynamics of crowdfunding and the degree to which it substitutes or it enhances venture capital (VC). Their findings support the argument that crowdfunding is a substitute of traditional VC for seed capital but it complements VC activity for subsequent rounds of financing. Consistently, they also find that crowdfunding activity clusters in the same main centers as venture capital financing.