Forecasting Success in Equity Crowdfunding

This paper analyzes a large dataset of 2,171 equity crowdfunding campaigns launched between the years 2012 and 2017 on two of the world’s largest platforms Crowdcube and Seedrs. Our results show that the equity crowdfunding market has matured: more recent campaigns tend to be launched by larger and older companies with better access to external financing. Given the market’s dynamics, we use a rolling three-year window to forecast funding success using a simple model based on information that is available at the time of the campaign (e.g., equity retained, external fundraising before the campaign, accelerator attendance and information about the directors’ team). Our forecasted success measure dominates a naïve classification for any given cutoff probability and outperforms the ratings issued by independent rating agencies.

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