Abstract
Crowdfunding constitutes one of the financial solutions to achieve the sustainable development goals, by fostering innovation and economic growth. This paper conducts an empirical two-country analysis (the UK and Spain) of characteristics of successful offerings to assess the distribution of overfunding in equity crowdfunding. Unlike previous research, which has usually comprised campaigns posted on single-country portals, our study is based on an international leading platform operating with country-differentiated websites, Crowdcube. Such an approach allows us to identify influential factors which are dependent on country and, simultaneously, to control for those platform-related factors. To focus on the overfunding distribution, a quantile regression methodology is adopted for a total sample of 299 overfunded campaigns from 2015 to 2018. Overall, empirical results show that the effects of key campaign features (equity, voting rights and social capital) are stronger and more significant at the 75th and 90th quantiles for the overfunding level and the number of investors. Furthermore, we find significant differences across countries, which persist along the distributions of overfunding. Yet, interestingly, between-country differences in overfunding level vanish for the technological sector. Our research provides further insights into the relation between equity crowdfunding and sustainable finance.
Highlights
The landscape of entrepreneurial finance has considerably changed over the last years (Block et al [1])
According to the latest data announced on the Crowdcube platform for 2018, 52.6% of total financing raised in equity crowdfunding in the UK has been through Crowdcube, followed by Seedrs with 30.9% and SyndicateRoom with 16.6%. Crowdcube has managed to raise more than 600 million euros, of which 20 million correspond to Spanish companies in the period 2014–2018. (Crowdcube News: https://www.crowdcube.com/explore/crowdcube/20-million-euros-raised-for-spanish-businesses.) Based on the Spanish Association of FinTech & InsurTech (AEFI), of the 19 million euros of total investment raised in 2017 by equity crowdfunding platforms, 37% corresponds to Crowdcube
The projects are listed according to the country-website on which they were posited in Crowdcube: crowdcube.es (Spain) or crowdcube.com (United Kingdom)
Summary
The landscape of entrepreneurial finance has considerably changed over the last years (Block et al [1]). The study of overfunding is important in equity crowdfunding due to the high risk level assumed by (non-professional) investors and the lack of liquidity for shares in secondary markets In this vein, our research provides support for the connection between financial risk management and sustainable finance. Our research is a first attempt to study whether differences in overfunding exist between two countries—the UK and Spain—when these countries share the same fundraising rules defined by the leading European equity crowdfunding platform, Crowdcube. If we consider only technology-related campaigns, we do not find significant differences in the overfunding level across countries These results suggest that equity crowdfunding may promote sustainable development by mitigating geographical inequalities in innovation and technological progress.
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