Crowdfunding Success Effects on Financing Outcomes for Startups: A Signaling Theory Perspective

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Publication History

Received: December 12, 2019
Revised: December 8, 2020; October 9, 2021; July 28, 2022
Accepted: November 15, 2022
Published Online as Articles in Advance: August 22, 2023
Published Online in Issue: September 1, 2023

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This study adopts a signaling theory perspective to examine whether and how crowdfunding (relative to angel financing) influences subsequent venture capital (VC) investments in startups. We used a bivariate probit model with propensity score matching to address the potential endogeneity of the initial funding choice. Subsequently, we found that crowdfunded startups have a lower chance of receiving VC funding than angel-financed startups and that the effect is more negative for startups located outside of startup cluster cities. We show that corporate VCs, unlike independent VCs comprising the majority of VCs, favor crowdfunded startups. Our study contributes to the literature on crowdfunding, startup finance, and the transformative effects of IT-enabled platforms. This study further discusses the practical implications of crowdfunding in startup finance ecosystems.

Additional Details
Author Sunghan Ryu, Keongtae Kim, and Jungpil Hahn
Year 2023
Volume 47
Issue 3
Keywords Crowdfunding, angel, startup, venture capital, corporate venture capital, signaling theory
Page Numbers 1271-1302
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