The Effect of Crowdfunding Success on Subsequent Financing Outcomes of Start-ups

Abstract

From the perspective of signaling theory, this study examines how the receipt of crowdfunding (compared with angel investing) is associated with start-ups’ subsequent financing outcomes. We collected data on crowdfunded start-ups as well as angel-funded start-ups and their subsequent financing from venture capitalists. Our results, after addressing the potential endogeneity using a bivariate probit model and propensity score matching, show that crowdfunded start-ups and angel investing start-ups have no statistically significant difference in receiving subsequent venture capital (VC) investments. Interestingly, however, the effect of obtaining crowdfunding on the receipt of subsequent investments from VCs differs across different characteristics of startup-ups. Moreover, when we compare corporate venture capitalists (CVCs) with independent venture capitalists (IVCs), obtaining crowdfunding is positively associated with the receipt of subsequent investments from CVCs, but not from IVCs.