Returns on Investments in Equity Crowdfunding

This paper quantifies for the first time the return on investments in equity crowdfunding. Using an augmented dataset with combined information from Crowdcube, Crunchbase and the Companies House, we study the population of 212 successfully funded initial equity offerings on UK crowdfunding platform Crowdcube from inception (2011) to 2015. We find that 10% of these firms failed, while 30% pursued one or more seasoned equity offerings, either in the form of private equity injection (10%), follow-on offering on the same platform (22%), or as target in a merger or acquisition (1%). The expected annualized return for an initial crowdfunding investor is 8.8%, implying an overall annual value creation of 25 £m. Among the determinants of post-campaign outcomes, the presence of non-executives, patents and tax incentives are associated with seasoned offerings, while none of the companies initially backed by professional investors have subsequently failed.