Crowdinvesting And Venture Capital: Complements Or Competitors? Empirical Evidence From The European Crowdinvesting Campaigns

Crowdinvesting platforms are specialized websites that allow average investors to invest in firm’s capital with valuable campaigns and business ideas. In this paper, we examine the behavior of investors and firms that raise capital through crowdinvesting platforms. Our sample is a unique and hand-collected data set of 490 campaigns promoted on CrowdCube, Companisto, Fundedbyme, Invesdor, and Seedmatch since their inception to July 2015. We first show that crowdinvesting increases the supply of risk capital in Europe, in particular in early-stage firms. We also show that crowdinvesting bridges the funding gap of early-stage firms, in particular those operating in traditional industries (considered not attractive for VC market). Second, we find that the average investors consider the social impact of the crowdinvesting campaign, democratizing investment into firms. Third, we evidence that crowdinvesting does not reduce private placement, which is a proxy for venture capital. Overall, our results indicate that crowdinvesting complements venture capital