Equity Crowdfunding: High-Quality or Low-Quality Entrepreneurs?

Daniel Blaseg, Douglas Cumming, Michael Koetter

Research output: Indexed journal article Articlepeer-review

63 Citations (Scopus)


Equity crowdfunding (ECF) has potential benefits that might be attractive to high-quality entrepreneurs, including fast access to a large pool of investors and obtaining feedback from the market. However, there are potential costs associated with ECF due to early public disclosure of entrepreneurial activities, communication costs with large pools of investors, and equity dilution that could discourage future equity investors; these costs suggest that ECF attracts low-quality entrepreneurs. In this paper, we hypothesize that entrepreneurs tied to more risky banks are more likely to be low-quality entrepreneurs and thus are more likely to use ECF. A large sample of ECF campaigns in Germany shows strong evidence that connections to distressed banks push entrepreneurs to use ECF. We find some evidence, albeit less robust, that entrepreneurs who can access other forms of equity are less likely to use ECF. Finally, the data indicate that entrepreneurs who access ECF are more likely to fail.

Original languageEnglish
Pages (from-to)505-530
Number of pages26
JournalEntrepreneurship: Theory and Practice
Issue number3
Publication statusPublished - May 2021


  • adverse selection
  • credit constraints
  • entrepreneurial finance
  • equity crowdfunding
  • pecking order theory


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