Equity crowdfunding in Germany and the United Kingdom: Follow-up funding and firm failure


Today, startups frequently obtain financing via the Internet through many small contributions of nonsophisticated investors. Yet, little is known whether these startups can ultimately build enduring businesses. This study investigates the determinants of follow-up funding and firm failure after an equity crowdfunding campaign has taken place. e use hand-collected data from 13 different equity crowdfunding portals and 413 firms that ran at least one successful equity crowdfunding campaign in Germany or the United Kingdom between 2011 and 2016. Our findings show that German firms that received equity crowdfunding stood a higher chance of obtaining follow-up funding through business angels or venture capitalists but also had a higher likelihood of failure. The number of senior managers and the number of initial venture capital investors both had a positive impact on obtaining postcampaign financing, whereas the average age of the senior management team had a negative impact. The number of initial venture capital investors and the valuation of the firm were significant predictors increasing the hazard of firm failure, whereas the number of senior managers and the amount raised during previous equity crowdfunding campaigns had a negative impact.

Corporate Governance: An International Review, 26(5): 331-354