The JOBS Act and the Boost for Start-Up Fundraising: A Regression Discontinuity Design Approach

Abstract

Crowdfunding plataforms are becoming increasingly popular, allowing micro-entrepreneurs to raise money to fund projects in various categories. The present study aims to explorar the effects of the JOBS (Jumpstart Our Business Startups, JOBS) Act, which fostered the crowdfunding model by smoothing several securities regulations, on fundraising, attraction of backers and fundraising categories, seeking to identify if there has been a change in the backer profile for the crowdfunding market, especially in the Kickstarter.com platform. The empirical analysis used a Regression Discontinuity Design model. The discontinuity lies in verifying the incentive provided by the increase in the number of backers and the volume of fundraising after the Act came into effect. When assessing the results, it could be noticed that the Act affected fundraising levels for start-up projects in 75%. In a similar way, it affected the number of backers in 59%. In order to test model specification, robustness tests were performed by fundraising category. The Design, Video Games and Technology categories presented both positive and significant results and reinforced the title of capital increase. There was an increase of US$ 22,599 in the coefficient, which represents a variation of 106% in relation to the average for the Design category. For the Video Games category, the increase was of US$ 42,523, or a variation of 222% in relation to the average. For the Technology category, it was observed that the effect generates an increase of US$ 52,733, or a variation of 174% in relation to the average. Looking at project quality and how it might attract backers, results for successful and unsuccessful projects and for average fundraising were estimated. The results indicate a significative increase in fundraising for successful projects and that they also present evidence on a higher fundraising average. The growth of the crowdfunding movement associated with the JOBS Act brought more institutional and legal security to micro-entrepreneurs, backers and users of crowdfunding platforms, demonstrating a positive effect for projects hosted on the Kickstarter.com platform, boosting their volume of fundraising.