Regional crowdfunding and high tech entrepreneurship

Abstract

• Crowdfunding in entrepreneurial categories precedes an increase in high tech firm starts in a region • Crowdfunding in entrepreneurial categories precedes a decrease in low tech firm starts in a region • Crowdfunding is more likely in highly educated and urban regions • Despite the greater frequency of crowdfunding in highly educated and urban regions, the impact of a crowdfunding campaign on high tech firm starts is greater in poor regions Despite extensive though mostly independent literatures on Crowdfunding and regional entrepreneurship, there exists little work that examines how Crowdfunding influences the rate and type of new venture formation in a region, what types of regions are more likely to experience Crowdfunding activity, and what types of regions are more likely to experience additional firm starts following Crowdfunding activity. We argue that Crowdfunding increases high tech and high growth regional firm starts by increasing crucial early-stage funding, providing the opportunity to signal success and legitimacy, facilitating access to entrepreneurial human capital, supporting inexperienced entrepreneurs with education and advice, and providing inexpensive market feedback. Instrumental variable regressions illustrate how Kickstarter campaigns precede an increase in high technology and growth in Crunchbase listings and a weak decrease in more conventional and local business registrations. While more per capita crowdfunding occurs in large cities relative to smaller cities, college towns, and poor regions with weak human capital, the impact per campaign appears greater in the poorer regions.