10 1016@j Jcorpfin 2017 10 018

CORFIN-01292; No of Pages 17
Journal of Corporate Finance xxx (2017) xxxxxx
Contents lists available at ScienceDirect
Journal of Corporate Finance

journal homepage: www.elsevier.com/locate/jcorpfin
Does success bring success? The post-offering lives of

equity-crowdfunded rms
Andrea Signori a, Silvio Vismara b,
a
Universit Cattolica del Sacro Cuore, Largo Gemelli 1, 20123 Milano, Italy
b
University of Bergamo, Department of Management, Information and Production Engineering, via Pasubio 7b, 24044 Dalmine, BG, Italy
a r t i c l e i n f o a b s t r a c t
Article history: Using an augmented dataset with combined information from Crowdcube, Crunchbase, and
Received 29 October 2016 Companies House, we study the population of 212 successfully funded initial equity offerings
Received in revised form 29 October 2017 on the UK's largest crowdfunding platform Crowdcube from inception (2011) to 2015. We
Accepted 30 October 2017
nd that 18% of these rms failed, while 35% pursued one or more seasoned equity offerings
Available online xxxx
in the form of either private equity injection (9%) or follow-on crowdfunding offering (25%),
while three rms were acquired. Among the determinants of the post-campaign scenarios,
JEL code: we nd that the degree of investor participation in the initial offering plays a relevant role.
G30
In particular, rms with more dispersed ownership are less likely to issue further equity,
Keywords: while those that reach the target capital more quickly are more likely to launch a follow-on of-
Crowdfunding fering. Further, none of the companies initially backed by qualied investors subsequently
Equity offerings failed.
Securities issuance
2017 Elsevier B.V. All rights reserved.
Private equity
Public equity
Entrepreneurial finance
The goal of the campaign isn't the campaign; it's life after the campaign.
[Chris Hawker, United Inventors Association of America, Director]
1. Introduction
The great deal of attention devoted by regulators to equity crowdfunding, where a large number of small investors bid for the
shares of rms listed on a web platform, is mirrored in a growing academic literature. Most studies focus on campaigns, whose
identied success factors include the characteristics of the business and its top management team (Ahlers et al., 2015) as well
as the properties of the offering and its funding dynamics (Vismara, 2016, 2017). The ultimate goal of crowdfunding, however,
is to build an enduring business. A successful campaign is therefore only a starting point. In this study, we investigate for the
rst time in literature what happens after a successful equity crowdfunding campaign.
External investors back projects in equity crowdfunding to receive a monetary return on their investment. Previous research
has indeed shown that non-nancial motives and the presence of physical and experiential rewards do not play a signicant
We would like to thank participants at the 2017 FMA meetings, 2016 ENTFIN conference at EMLyon, 4th Crowdinvesting Symposium at Max Planck Institute for
Innovation and Competition in Munich, and seminars at KU Leuven, Politecnico di Milano, Universidad de Alicante, Universitt Augsburg, Universitt Trier, Universiteit
Antwerpen, Carlo Allevi, Douglas Cumming, Alexander Groh, Michael Mdl, Kourosh Sha, and Tom Vanacker for helpful comments. We beneted from discussions
with the managers of the equity crowdfunding platforms Seedrs and WeAreStarting.
Corresponding author at: Department of Management, Information and Production Engineering, University of Bergamo, viale Marconi 5, 24044 Dalmine, BG, Italy.
E-mail address: silvio.vismara@unibg.it (S. Vismara).
https://doi.org/10.1016/j.jcorpn.2017.10.018
0929-1199/ 2017 Elsevier B.V. All rights reserved.
Please cite this article as: Signori, A., Vismara, S., Does success bring success? The post-offering lives of equity-crowdfunded rms,
J. Corp. Finance (2017), https://doi.org/10.1016/j.jcorpn.2017.10.018
2 A. Signori, S. Vismara / Journal of Corporate Finance xxx (2017) xxxxxx
role in this context.1 Shares of rms listed on crowdfunding platforms, however, are difcult to trade. The development of a sec-
ondary market is prevented by both the small potential free oat and serious concerns about investor protection. For instance, the
JOBS Act in the United States prohibits a secondary market during the rst year of issuance. In the absence of liquid secondary
markets, crowdfunders have the opportunity to realize returns on their investments only in the presence of post-offering deals,
such as mergers and acquisitions (M&As) or initial public offerings (IPOs).
The assessment of post-campaign outcomes is crucial to the future of equity crowdfunding markets. Entrepreneurs can be
tempted to shirk and engage in self-dealing in the aftermarket, if not to pursue outright fraud (Cumming et al., 2016a). Indepen-
dently of moral hazard problems, crowdfunded rms may also fail soon after the campaign because of the risky nature of the pro-
jects or overcondence of their proponents. Investors lose their money in the event of the failure of the company in which they
invested regardless of the reason for such failure. At the equilibrium, the risk of such an eventuality is thus priced into the asset
class.
Risky assets such as the shares offered in crowdfunding promise high returns. Coherently, the inspection of the business plans
of crowdfunding rms reveals that most companies provide optimistic estimates.2 However, the Financial Conduct Authority
(FCA) in the United Kingdom has raised the concern that these estimates are based on a misleading or unrealistically optimistic
impression of the investment (FCA, 2015, p. 8). Given that companies' lives after the campaign have thus far been unexplored
and that understanding which successful campaigns have the ability to become successful investments is of primary importance
for investors, an empirical answer to this question is long overdue.
Our empirical setting is based on the population of 212 rms that successfully raised equity capital on the UK crowdfunding
platform Crowdcube during 20112015. We construct an augmented dataset by relying on Crowdcube, Crunchbase, and Compa-
nies House as data sources. We then track these companies until the end of April 2017 and, in line with the scenarios discussed
above, categorize them as (1) seasoned equity offerings (SEOs) if they received additional equity capital infusions, (2) M&As if
they were targeted in an acquisition, (3) active if they were operating independently and no additional capital was raised, and
(4) failed if they ceased operating. Among SEOs, we then distinguish between (a) public offerings if the company launched a
follow-on crowdfunding offering and (b) private offerings if the company received nancing from business angels (BAs) or ven-
ture capitalists (VCs). Fig. 1 depicts the possible scenarios faced by a company after its rst successful crowdfunding offering.
We nd that 38 of our 212 sample rms failed (17.9%). This is a low percentage compared with the 56% failure rate to return
capital reported for BA investments in the United Kingdom (NESTA, 2009). Among our crowdfunding companies, 74 (34.9%)
raised further capital in SEOs, of which 54 (25.5%) raised additional public equity on the same platform and 20 (9.4%) secured
private equity from BAs or VCs, while three (1.4%) were targeted in M&A deals. In addition, 20 rms (9.4%) conducted multiple
SEOs within two years of the initial offering. The SEOs all represent up rounds in terms of implicit valuations.
Among the determinants of the likelihood of going through each of the post-offering scenarios, we nd that the degree of in-
vestor participation in the initial offering plays a relevant role. We measure investor participation along three dimensions. First,
we nd that initial offerings backed by a larger number of investors are less likely to be followed by a successful outcome such
as SEO or M&A. This evidence seems consistent with a reduced monitoring effect (Brennan and Franks, 1997), as the greater dis-
persion of outside investors weakens their incentive to effectively monitor the rm's managers, thereby decreasing the likelihood
of a successful outcome. Second, we nd that rms that raise the target funding more quickly exhibit a higher likelihood of
launching a follow-on offering, in line with a stronger propensity to return to the platform by those entrepreneurs who received
a favorable market assessment during their rst experience. Third, we nd that none of the rms whose offering is backed by a
qualied investor has subsequently failed, consistent with the idea of qualied investors possessing superior information that al-
lows them to pick rms with more promising business models.
The remainder of this paper is organized as follows. In Section 2, we elaborate on the theory. Section 3 presents the institu-
tional setting for equity crowdfunding in the United Kingdom. Section 4 explains our decision to use Crowdcube as the empirical
setting and describes the data, variables, and methodology used in the study. In Section 5, we report the results. Section 6 per-
forms a number of additional tests aimed at checking the robustness of our main evidence. Section 7 concludes and discusses
the implications of our ndings.
2. Literature review
2.1. Failures
Like any entrepreneurial nance setting, equity crowdfunding markets are not exempt from information asymmetry issues. For
instance, BAs and VCs rely heavily on due diligence predicated on face-to-face interactions and personal relationships. In IPOs, un-
derwriters are in charge of pricing and allocating shares. Typically, crowdfunding investors have to rely on individual due dili-
gence, which may generate a reluctance to invest in crowdfunding projects, with potential investors willing to do so only if
1
In a direct comparison between reward-based and equity-based crowdfunding, Cholakova and Clarysse (2015) nd that non-nancial motives play no signicant
role in the latter. In a multi-platform study of equity crowdfunding campaigns, Vismara (2016) nds that offering rewards to investors does not increase the probability
of success.
2
In Crowdcube, for instance, companies are required to provide a nancial snapshot, which summarizes the key numbers of their business plan in a clear and con-
sistent format across all pitches.
A. Signori, S. Vismara / Journal of Corporate Finance xxx (2017) xxxxxx 3
Fig. 1. Post-offering outcomes of crowdfunding projects. Post-offering scenarios of 212 funded offerings on Crowdcube. The observation date is end of April 2017.
While failures and M&As are censoring scenarios, rms with multiple SEOs are categorized based on the rst event.
compensated by a discount. This could eventually cause an Akerlof-type market failure, resulting in vanishing markets because the
only equilibrium price would be zero.
The weak individual-level incentives to perform due diligence increase the possibility of low quality rms listing on
crowdfunding platforms. Vismara (2017) nds that crowdfunding investors free-ride on the investment decisions of previous
backers and bid on the projects with the greatest number of investments in an information cascade fashion. With the
crowdfunding community systematically underinvesting in due diligence, low quality projects will be pooled with high quality
ones. At the extreme, crowdfunding may deliver conditions that can be exploited by criminals in an attempt to prot from
fraud. As a leading source of Internet fraud, Internet auctions have been characterized by the information system and criminology
literature as highly criminogenic environments (Chua et al., 2007). Moreover, relative to platforms such as eBay and Airbnb, the
lack of repeated interactions in equity crowdfunding increases the potential for fraud. The assessment of the survival proles of
equity crowdfunding companies is therefore of central importance for the future of these markets. Walthoff-Borm et al. (2017)
nd that in the UK equity-crowdfunded ventures exhibit higher failure rates relative to matched non-crowdfunded rms.
By way of a comparison, we discuss the available evidence in related markets, namely reward-based crowdfunding and tradi-
tional IPOs.3 Cumming and Johan (2016) offer some examples of fraudulent behavior in reward-based crowdfunding in the United
States. A few headline-grabbing fraud cases have also been reported in equity crowdfunding. For instance, in February 2016, the
claims management group Rebus went into administration less than a year after raising 816,790 via an equity crowdfunding
round from over 100 investors (at the time of listing, Rebus forecasted prots of 12 million by 2017/18).
The comparison with the IPO literature is less straightforward, as the survival prole of IPOs is shaped by the delisting deci-
sion, which might be motivated by different, not necessarily negative, reasons. For instance, rms can delist from a second-tier
market to transfer to a main market or be taken over because of their attractiveness as acquisition targets. Therefore, delistings
can even represent a desirable outcome.4 Vismara et al. (2012) show that approximately one-quarter of the delistings of
European IPOs over the past two decades are associated with an M&A and that transfers from different markets are also frequent.
2.2. Public SEOs
Central to the corporate nance literature, our work is related to studies of stage nancing. Instead of providing all the neces-
sary capital upfront, VCs invest in stages. Since the seminal study by Sahlman (1990), a large literature has modeled such a stag-
gered infusion of capital over time as a control mechanism used by VCs, who retain the option to abandon investee rms whose
3
These comparisons have some limitations. On the one hand, equity-based crowdfunding is intrinsically different from reward-based crowdfunding in terms of the
nature of its proponents and size of the deals. While in equity crowdfunding the proponent is by denition a company, reward-based campaigns are launched mostly by
individuals. The governance and organizational implications of the process of raising capital through crowdfunding are arguably different. The monetary value of an
equity crowdfunding campaign is typically higher. For instance, the average target funding in our sample is 197,962, while in Kickstarter, the world's largest
reward-based platform, it is less than $15,000. On the other hand, equity offerings on traditional stock markets (i.e., IPOs) are arguably less risky than those taking place
in crowdfunding platforms. While rms going public typically are at least a few years old, equity crowdfunding projects are typically proposed by rst-time entrepre-
neurs soon after their conception.
4
Differences in methodology, sample size, and period as well as in the denition of involuntary delisting make comparisons between studies challenging and limit
our ability to draw strong conclusions. For instance, some studies categorize M&As as censored survivors, while others categorize them as non-survivors. Moreover,
the determinants of delisting rates depend on the identication of the event.
performance turns out to be worse than expected. Hellmann's (1994) multi-stage model, for instance, explains how stage nanc-
ing provides incentives for active monitoring. Staging capital indeed allows the VC to gather information and monitor the progress
of rms, while the threat (put option) of exit creates incentives for the entrepreneur to maximize value, eventually at the cost of
inducing short-termism. A similar line of thought applies to studies that relate IPOs to seasoned public offerings (Welch, 1989).
By receiving a rst market assessment of the project and providing evidence of a connection with active supporters, rms are
expected to benet from a successful crowdfunding campaign, both in the product and in the nancial market. As discussed in the
Introduction, rms listing on equity crowdfunding platforms propose optimistic growth expectations that are, however, difcult to
meet without the injection of additional capital. Successfully crowdfunded rms that subsequently do not engage in further deals
are unlikely to become high growth rms. Moreover, living dead (Sahlman, 1990) rms do not mitigate adverse selection and
moral hazard concerns through the progressive reduction in information asymmetries, as VC staged nancing typically does
(Gompers, 1995). Raising follow-on funds is important for rms to realize their growth ambitions and for initial crowdfunders
because their investments need to grow to provide an attractive exit.
2.3. Private SEOs
Crowdfunding generates additional benets, even after the end of a campaign, such as direct access to customers, media, em-
ployees, and, most importantly, VCs. In a survey of 158 successfully funded projects in Kickstarter, Mollick and Kuppuswamy
(2014) nd that around 18% of respondents raise outside risk capital in the forms of VC or BA investing, while 8% do so through
additional reward-based crowdfunding campaigns. Proponents' specic industry experience and the presence of a substantially
complete business plan before fundraising are the main predictors of outside funding (Mollick and Kuppuswamy, 2014, p. 12).
Through an experimental study of 104 VCs, Drover et al. (2017) demonstrate that the heterogeneous nature of the attributes
of angels and the crowd can produce highly inuential certication effects. In particular, projects that have successfully raised
funds on reputable crowdfunding platforms face a higher probability of being selected by VCs for formal due diligence. The suc-
cess of a crowdfunding campaign might indeed be interpreted as a proxy for the commercial potential of the project. More pre-
cisely, Drover et al. (2017) nd that investment by a high volume of crowdfunders increases the probability of VC selection, but
the relationship is contingent upon platform type where the effect is stronger in the reward model than in the lending- or equity-
based one.
By using data from 2009 to 2015 on Kickstarter campaigns and VC investments, Sorenson et al. (2016) nd that an increase in
the annual number of Kickstarter campaigns leads to an increase in VC investments over the subsequent years. Successful cam-
paigns may address the attention of VCs towards innovators in the region or specic people running these successful campaigns.
The theoretical work by Colombo and Sha (2016) proposes a two-stage model to estimate whether and when crowdfunding
campaigns increase the likelihood of obtaining VC or BA nancing. While crowdfunding increases the likelihood of subsequent -
nancing for VC/BA-backed rms, in the case of non-VC/BA-backed rms crowdfunding money can, on the demand side, decrease
the nancial needs of entrepreneurs and thus reduce the likelihood of looking for a VC/BA. At the same time, on the supply side,
the capital raised through crowdfunding may reveal the presence of demand for the product and thus increase the chance of
obtaining VC/BA nancing. Empirical evidence from hardware projects in Kickstarter and Indiegogo supports the proposition of
this model.
2.4. M&As
Searching for potential acquirers is costly as it entails the consumption of time and resources. The literature on IPOs has dem-
onstrated that a sequential divestiture strategy through IPOs may be attractive relative to a direct sale if it serves to raise the
rm's prole and reduce uncertainty (Shen and Reuer, 2005). The contextual move from the private to the public domain indeed
increases the level of a rm's disclosure and eases access to information. This makes the process of going public responsive to ad-
verse selection problems by increasing the amount of information available on rms, especially for those that suffer from a larger
degree of ex-ante information asymmetry. We argue that similar arguments hold for equity crowdfunding offerings, whose role in
increasing rm visibility and disclosure resembles that of IPOs.
One important benet of rst going public and then being acquired is that by successfully going through the due diligence pro-
cess associated with an IPO, the rm may be able to reduce the asymmetric information faced by potential acquirers, thus en-
abling it to obtain a higher valuation in a post-IPO acquisition relative to the valuation it can obtain in a direct acquisition as a
private rm. A second important benet is that the rm may be able to invest the external capital raised in the IPO in growth
opportunities and thus obtain a higher valuation in an eventual post-IPO acquisition compared with the scenario where it is ac-
quired as a private rm, in which case its valuation may be lower because of the inability to fully implement its growth oppor-
tunities owing to the nancial constraints faced as a private rm. Coherently, recent nance studies have conrmed that a
growing number of rms are acquired soon after their IPOs (Gao et al., 2013).
A parallel stream of research in entrepreneurship (e.g., Audretsch and Lehmann, 2007; Lehmann et al., 2012) has modeled the
market for corporate control as a matching mechanism between established and entrepreneurial rms with regard to assets
(Granstrand and Sjlander, 1990) and innovation (Acs and Audretsch, 1988). These studies argue that the decision to be acquired
by incumbents is often value-maximizing for entrepreneurial rms. Everything else equal, for the reasons discussed above, this
possibility is higher for listed than private rms.
2.5. Qualied investors
The distinction between small (restricted) and qualied (sophisticated) investors is of current interest. First, one of the most
sought after benets of a successful crowdfunding campaign is the proof of market demand for the product or service delivered
(NESTA, 2014). While this can be related to the presence of inuential investors, it is also directly related to the visibility that
stems from being listed and successfully funded on a public crowdfunding platform. Successful campaigns are indeed covered
by the media, particularly when the number of investors is remarkably high or large amounts of money are quickly raised. For
instance, all the major nance newspapers reported that Crowdcube self-crowdfunded 1.2 million in only 16 min in 2014 and
that Pressery reached its target capital in less than 2 h in its 2015 offering.
Second, recent changes in traditional stock markets have drawn further attention towards the different roles played by qual-
ied and retail investors on equity crowdfunding platforms. Over the past two decades, three quarters of the IPOs in Europe have
taken place in secondary markets such as London's Alternative Investment Market (AIM). As reported in Vismara et al. (2012),
most of these IPOs are offered exclusively to institutional investors and are equivalent to private placements, which frequently
raise only a few million euros and rarely develop liquid trading. With institutional investors being allocated the largest proportion
of IPO shares (Aggarwal et al., 2002), crowdfunding investors are likely to be more diverse than shareholders of newly listed
companies.
Crowdfunding offerings attract small and qualied investors alike.5 As modeled in this paper, private SEOs occur when the rm
receives capital infusions by BAs or VCs after the closing of its initial crowdfunding campaign. However, qualied investors also
invest during campaigns. BAs are frequently found to operate on equity crowdfunding platforms (Enterprise Research Centre,
2014) and Crowdcube reports that nine VCs invested in campaigns launched on its platform.6 Additionally, the UK government
has invested 1.25 million in nine offerings through the London Co-Investment Fund. As superior principals, these qualied in-
vestors are likely to benet from an informational advantage over small investors. Small investors in crowdfunding have limited
opportunity to perform due diligence because of the presence of xed costs.7 Moreover, they lack the experience and capability to
evaluate different investment opportunities (Ahlers et al., 2015). By contrast, qualied investors are more likely to possess a more
accurate set of information that allows them to select high quality offerings. If this is the case, we would expect the offerings
backed by such investors to be less likely to fail and more likely to raise further capital. This nding would lend support to the
intertwined relation between traditional funding models and equity crowdfunding with qualied investors picking the winners.
The scope of the benets brought about by the presence of qualied investors extends beyond the nancial aspect. BAs and
VCs are expected to provide portfolio companies with bundles of value-added activities (Gompers and Lerner, 2001). These in-
clude both direct and indirect benets such as coaching, access to network and certication effect to third parties
(e.g., customers, skilled workers, alliance partners, nancial intermediaries). The presence of qualied investors can help develop
a better strategy and gain market share more quickly. Consumer research posits that the support of inuential individuals accel-
erates the diffusion of products and innovations (Valente, 1995). In this vein, rms with offerings backed by qualied investors
are expected to outperform other rms because of both selection and treatment effects. Hence, companies that are able to attract
qualied investors in their initial crowdfunding offering are expected to show lower failure rates and a higher capacity to raise
further funds, especially through private channels in a sequential investment strategy (Sahlman, 1990).
If, as motivated above, backing by qualied investors is expected to be positively related to the post-campaign performance of
rms, the long-run effect of small investors is more ambiguous. On the one hand, attaining equity nancing, no matter the inves-
tor type, engenders a certication effect. Information cascades among early investors in equity crowdfunding offerings is indeed
crucial to attract late investors and secure the success of the campaign (Vismara, 2017). Since crowdfunders are potential cus-
tomers, this positive effect extends from the nancial to the product market. A high number of backers presumes an appreciation
of the concept, which may translate into market demand. If this is the case, we would expect a favorable market assessment in
the initial offering to be associated with a lower probability of failure soon after the campaign. Relatedly, variations in the time
and amount of the collective funding received during the campaign is valuable information for future investors (Drover et al.,
2017). A positive debut on the crowdfunding market might therefore increase an entrepreneur's likelihood of raising further
crowdfunding capital or becoming a serial crowdfunder (Buttic et al., 2017).
However, because certications are social cues, their value depends on the characteristics and reputations of the certiers.
Given the lack of sophistication, investments by the crowd might convey less certication if small investors are considered to
be less equipped to assess the prospects and viability of projects. Owing to xed costs, they have limited opportunity and
fewer incentives to perform due diligence. The greater dispersion of shareownership also weakens the ex-post incentives to
5
The corporate nance literature denes small investors as those who invest relatively small amounts of money and receive a relatively small stake of a company in
return. This denition is in line with that of restricted investors used in crowdfunding (see Section 3).
6
Independent VCs that have invested in campaigns on Crowdcube include Balderton Capital, British Business Bank, DN Capital, Episode1, Forward Partners, Index
Ventures, MMC Ventures, Octopus Investments, Passion Capital, and Wellington Partners. Other sources conrm the participation of professional investors in UK equity
crowdfunding campaigns. NESTA (2014) reports that institutional investors embracing alternative nance are becoming a feature of the UK market. Although BAs are
not necessarily professional investors, we expect them to have a similar effect on the outcome for VCs. Indeed, both BAs and VCs can be expected to have lower costs of
accessing and processing information than retail investors.
7
Crowdfunders receive a relatively small stake in a company in return for their investment. As reported by Vismara (2017), the average equity stake offered in
Crowdcube is 13.8%, whereas the average number of investors in successful campaigns is 152.5. This means that the average investor acquires b0.1% of the company's
equity. On the contrary, qualied investors tend to invest relatively substantial amounts of money. For instance, the crowdfunding offering of Sugru, the creator of the
world's rst moldable glue, raised 1 million in a single investment.
monitor rms (Brennan and Franks, 1997). In particular, corporate governance concerns might make qualied investors reluctant
to invest in companies where they would have to share the command with a large number of smaller investors. Coherently,
Cumming et al. (2017) nd that qualied investors are more likely to invest in offerings that deliver voting rights above a certain
threshold compared with those that deliver voting rights to every investor. These considerations induce us to expect a negative
effect of the number of crowdfunding investors on the probability of attracting qualied investors after the campaign.
3. Equity crowdfunding in the United Kingdom
The United Kingdom has the most developed pure equity crowdfunding market in terms of both the number and the size of
offerings. Its success factors are, at least partly, the same as those of other entrepreneurial nance markets. For instance, the Brit-
ish VC industry is the most developed in Europe and London's AIM the most successful second-tier stock market (Vismara et al.,
2012). Coherently, the Depth of Capital Markets Index, developed by Groh et al. (2012), ranks the United Kingdom as fourth
worldwide, the only European country among the top ve. Moreover, the regulation of equity crowdfunding in the United
Kingdom is often put forward as an important ingredient of its development (Steinhoff, 2014).8 We focus below on two aspects,
namely the conditions required by platforms to participate as investors and the tax incentives crafted for them.
UK regulation on equity crowdfunding is dened by the FCA's Policy Statement PS14/4, which delegates the FCA to mitigate
the liquidity risk investors face when investing in the equity or debt securities of small and medium enterprises which are difcult
to price and for which there is no, or only a limited, secondary market. To this extent, three types of investors are allowed to
trade on crowdfunding platforms, namely high net worth, sophisticated, and restricted investors. High net worth investors are de-
ned under preexisting rules as those with an annual income of at least 100,000 or net assets of at least 250,000. An investor is
certied as sophisticated if a qualied rm assesses the investor's capability to understand the risks associated with engaging in
non-readily realizable investments, or in presence of a Self-Certied Professional Investor statement in which the investor de-
clares him- or herself to be a member of a BA network, to have worked in the business nance sector over the previous two
years, or to have served as a director of a company with at least 1 million in revenue. We classify the rst two categories, namely
high net worth individuals and sophisticated investors, as qualied investors. If (and only if) an investor is neither high net worth
nor sophisticated, he is a restricted investor. In this case, the proportion of money invested in non-readily realizable investments,
including crowdfunded securities, cannot exceed 10% of his or her net assets. Restricted investors are required to certify that they
understand investment opportunities and risks or have received independent advice.
There are signicant tax incentives for investing in small businesses in the United Kingdom. Two overlapping incentive pro-
grams are of particular interest to crowdfunding investors, as testied by the high visibility given to these programs on all plat-
forms. First, the Enterprise Investment Scheme (EIS) provides a tax deduction of 30% of the cost of the shares purchased in
qualifying private companies with a maximum tax benet of 300,000. Second, the Seed Enterprise Investment Scheme (SEIS)
provides additional incentives by exempting shares up 150,000 in value from capital gains tax. This amount is set as the standard
maximum issuance sought by UK crowdfunding platforms such as Seedrs and Crowdcube, and exceptions can only be granted to
issuers that present a compelling proposition subject to the platform's approval. The EIS and SEIS are subject to a three-year
minimum holding period, with relief being clawed back if shares are disposed of earlier. This fact could create an incentive to
postpone exit from crowdfunded rms.
4. Research design
4.1. Crowdcube
In light of the arguments discussed in the previous section, the UK experience provides us with a unique opportunity to ex-
plore equity crowdfunding as well as a possible predictor of what might happen in the United States. The largest equity
crowdfunding platform in the United Kingdom is Crowdcube, on which we focus herein.9 From its establishment in 2011 until
September 2016, Crowdcube raised 165.4 million (AltFi, 2016). Each project's business plan is vetted before listing, whereas
no ongoing reporting is required to the company. Like other equity crowdfunding platforms, Crowdcube works in the traditional
all-or-nothing fashion (Cumming et al., 2014). Only if the target amount is reached is the campaign successful and do investors
become direct shareholders in the company. Crowdcube provides the most useful empirical setting in which to investigate our
aims. First, it represents the largest sample size and has the longest trading history among UK crowdfunding platforms. Second,
the direct involvement of a large number of small investors makes this platform particularly suitable for corporate nance studies.
Most such works have indeed used this empirical setting (e.g., Cumming et al., 2017; Vismara, 2016, 2017).
We now motivate our choice by commenting on the alternatives. According to AltFi (2016), Seedrs is the second largest equity
crowdfunding platform in the United Kingdom, with a funded equity volume of 69 million as of September 2016. Seedrs is not,
8
Other countries such as Germany allow for certain prot-sharing arrangements, but forbid the sale of shares carrying voting rights on crowdfunding platforms. In
countries where pure equity crowdfunding is permitted, such as France and Italy, the amount of capital raised to date is considerably lower than that in the United
Kingdom (Vismara, 2016).
9
According to AltFi (2016), Crowdcube has raised more capital than all other competing platforms. Beauhurst names Crowdcube as the leading equity investor in
2015 and the most prolic investor in the e-commerce sector. Crowdsurfer estimates Crowdcube's share in the UK investment crowdfunding market in 2015 to be
52%. See Rossi and Vismara (2017) for a detailed description of the evolution of equity crowdfunding markets and an analysis of what Crowdfunding platforms do.
however, a pure equity crowdfunding platform given its unied nominee structure. Hence, the platform continues to serve as rep-
resentative of its investors throughout the investment period, rather than each individual backer becoming a shareholder.
SyndicateRoom is the third largest platform (57.4 million), which requires at least 25% of the target capital to be already com-
mitted by BAs and/or professional arms-length investors.
4.2. Sample and data
We construct an augmented dataset by relying on Crowdcube, Crunchbase, and Companies House as data sources. From
Crowdcube, we identify the equity offerings that make up our sample, covering the platform since its inception in 2011 to the
end of August 2015. Starting from the population of 318 successfully funded offerings, we exclude 12 mini-bond offerings and
94 SEOs (i.e., follow-on campaigns conducted by companies that had already raised funds on Crowdcube). The nal sample is
made of 212 initial equity offerings.
We then monitor these companies from the closing date of their initial offerings until the end of April 2017, using Crunchbase
to identify capital infusions and Companies House to identify failures.10 Crunchbase is a database of startup companies operated
by TechCrunch that records information about their characteristics and relevant events. We collect information on the equity of-
ferings carried out by each company, including the type of transaction and identity of the investors. Crunchbase is increasingly
used in entrepreneurial nance studies (e.g., Cumming et al., 2016b; Hellmann and Thiele, 2015). Companies House is a govern-
ment agency acting as the ofcial registrar of UK companies. All companies incorporated in the United Kingdom are required by
law to periodically le their accounts to Companies House, which makes them publicly available through its ofcial website. The
Companies House website also reports whether accounts are led in time by the rm or are overdue, thereby allowing us to iden-
tify rms that, despite being formally active, might be distressed or have ceased operating.
We categorize our sample companies into four post-offering scenarios. First, we classify as SEO those companies that raised
additional capital after their initial crowdfunding offering, according to Crunchbase. Second, we categorize as M&A companies
that were acquired by another rm. Third, active companies correspond to those listed as active at Companies House at the
end of the observation window, but that did not raise further capital. Fourth, failed companies refer to those listed as dis-
solved, in administration, or in liquidation, or whose compulsory ling of accounts is overdue by more than six months at
Companies House, or if their website indicates that trading has ceased. Finally, we further distinguish SEO companies based on
the type of transaction, namely (1) public SEO if the company launched a new crowdfunding offering and (2) private SEO if
the company received nancing by a BA or VC. Data on VC and M&A transactions are cross-checked in Thomson Financial SDC.
4.3. Variables
The three main variables of interest in our study aim to capture the extent to which investor participation in the initial offering
affects post-campaign outcomes. These are measured at the end of the initial crowdfunding campaign. First, we include the num-
ber of investors who participated in the offering, used in Ahlers et al. (2015) and Vismara (2016) as a proxy for the success of the
offering. Second, we dene a quick success dummy, which is equal to one if the target capital was raised within the rst 20 days
of the offering. Since these companies have been able to reach the target amount in less than one-third of the standard duration
of an offering (set to 60 days), we investigate the effect that such remarkable success may have on the occurrence of post-offering
scenarios. Third, we monitor the participation of qualied investors in the initial offering by including the qualied investor
dummy, which is equal to one if a BA or VC has invested in the company. Qualied investors are identied by Crowdcube, as
they typically disclose their identity by linking their prole to webpages or professional social networks (Vismara, 2017). We
also cross-check these data in Crunchbase.
We then rely on prior studies of the success of equity crowdfunding campaigns (i.e., Ahlers et al., 2015; Vismara, 2016) to
complete the set of independent variables.11 In particular, we employ company- and offering-specic variables measured at the
launch of the initial offering. We dene rm age and diversication by referring to the incorporation date and number of different
four-digit SIC codes reported in the Overview section of the Companies House website. Then, since the quality of the company
crucially affects the likelihood of going through each of the post-offering scenarios, we employ a number of proxies to control
for this effect. First, we include a positive sales dummy, which is equal to one if the company had already reported positive
sales before the initial crowdfunding offering, according to the nancial snapshot published on the pitch webpage. Second, we
control for the presence of non-executive directors on the company's board given their potentially valuable advisory role, setting
a dummy equal to one if the company has appointed at least a non-executive director. Third, we include a patents dummy, which
equals one if the company owns or is currently ling patents, according to the information reported in the pitch details.
Finally, we control for offering-specic effects by including in our regression the amount of target capital and proportion of
equity offered. Ahlers et al. (2015) and Vismara (2016) show that these variables inuence the probability of the success of an
10
All our sample rms are present in both the Crunchbase and the Companies House databases, with the exception of one rm that is incorporated outside the United
Kingdom and is therefore not present in the latter. To retrieve information about the post-offering status of this rm, we rely on its website, Internet news, and social
network pages. A potential limitation may arise from the fact that the information available from Crunchbase is largely provided by its contributors. This fact implies that
a given transaction may be missed if no one has submitted information about it. However, details on public SEOs are publicly available on the Crowdcube website, and
private SEOs are usually highly publicized by both the rm and the crowdfunding platform as a signal of success.
11
Appendix A presents a correlation matrix of the independent variables. All the variance ination factors associated with each model specication fall well below the
acceptable threshold of 10, indicating that multicollinearity is not a concern.
equity offering. Moreover, since different classes of shares can be issued depending on whether they carry voting rights
(Cumming et al., 2017), we include a voting rights dummy that equals one if they do. Finally, we identify offerings eligible for
the SEIS tax incentive by setting the tax incentive dummy equal to one.
4.4. Methodology
We estimate a company's likelihood of going through each of the post-offering scenarios while taking into account the time
elapsed since the initial offering. An appropriate way in which to model this situation is to estimate hazard rates, which represent
the probability that a given scenario occurs at a given time, conditional on the fact that neither this nor other alternative scenarios
have occurred before that time. We do so by employing a competing risks proportional hazard duration model (Fine and Gray,
1999), tted by using the maximum likelihood approach. This technique allows us to determine the hazard rate for a scenario
of interest in the presence of other possible competing scenarios.12
In our setting, we consider an SEO to be the event of interest, with failure being the competing event, to investigate the de-
terminants of both scenarios. Since the limited number of observations (three rms) prevents us from modeling M&As as an in-
dependent scenario, we merge M&As with SEOs, as they can be both considered to be successful outcomes. Active companies
correspond to the right-censored observations. The time to the occurrence of the event is measured from the closing date of
the initial crowdfunding offering, as reported in Crowdcube. For failed companies, the event date is the failure date or commence-
ment date of the rst insolvency case if the company is in administration or liquidation, according to the Companies House
website. For SEOs, we use the date of the completion of the second crowdfunding offering, as reported on the platform website,
or of the private deal, as recorded in Crunchbase. We then repeat our analysis by distinguishing public and private SEOs. If a com-
pany conducts multiple SEOs, its scenario is determined by the rst event. Our company-, offering-, and investor-specic mea-
sures are the explanatory variables. Lastly, we also estimate a zero-inated negative binomial regression with a company's
number of SEOs within two years of the initial offering as the dependent variable. We dene the dependent variable over a con-
stant, two-year post-offering window because unlike the competing risks proportional hazard duration model, count models do
not correct for the time dimension, thereby leading to biased estimates in case of a varying time window. The choice of the
zero-inated negative binomial model is motivated by the fact that the largest proportion of observations (both active and failed
companies) have zero post-offering SEOs. Moreover, the distribution properties of this variable make the negative binomial pref-
erable to a Poisson model, which requires no overdispersion.
The fact that our analysis is conducted on companies that have completed a successful initial offering raises the concern that
selection in the successful and unsuccessful samples is not random. As a consequence, the unobservable characteristics that deter-
mine the success of a company's initial offering may also be correlated with the likelihood of going through a given post-offering
scenario, thereby producing biased estimates. We therefore address this issue by adopting the two-step Heckman procedure. In
the rst step, we model the probability of conducting a successful initial crowdfunding offering by means of a probit regression
with the success dummy as the dependent variable. In this step, all companies that launched their campaigns on Crowdcube
are included in our analysis. Data on these campaigns are collected over time by using web-scraping software. We follow the
specications used by Ahlers et al. (2015) and Vismara (2016) to model the success of crowdfunding campaigns and include
the log of company age, positive sales, non-executive directors, and patent dummies, log of target capital, proportion of equity
offered, voting rights, SEIS tax incentive, and industry (one-digit SIC) dummies as the independent variables. Furthermore,
since the Heckman model requires instruments to avoid identication being driven by the non-linearity of the rst step, we iden-
tify the competing offerings variable as the instrument, dened as the log of one plus the number of offerings active and available
on Crowdcube at the launch date of the considered offering. This measure is an important determinant of offering success
(Vismara, 2017) but is presumably uncorrelated with a company's likelihood of going through a given post-offering scenario. In
the second step, we then run our competing risks and count models while correcting for selection bias thanks to the inclusion
of the inverse Mills ratio, estimated in the rst step, among the independent variables.
5. Results
Table 1 reports the sample distribution by the year of the completion of the rst equity offering. Overall, 74 rms (34.9%) con-
ducted an SEO, the majority of which (37) had their initial offering in 2014, while three rms (1.4%) were targeted in an acqui-
sition. Deal information reveals that all SEOs in our sample represent up rounds in terms of implicit valuation, with follow-on
offerings at higher prices than the initial crowdfunding offerings. All the M&As of crowdfunded rms delivered positive returns
for crowdfunding investors. Examples of M&A deals are E-Car Club and Camden Town Brewery. E-Car Club was bought out by
Europcar in July 2015, approximately two years after its March 2013 initial equity offering. Camden Town Brewery was acquired
by Anheuser Busch InBev in a deal worth about 85 m. The acquisition took place in December 2015, approximately eight months
12
The competing risks model is more suitable to our setting than other possible alternative models. First, standard duration models such as KaplanMeier treat ob-
servations going through competing events as censored. In our setting, this would imply that failed companies could presumably still conduct an SEO in the future,
which is clearly not the case. Second, the traditional Cox proportional hazard model can be adapted to account for multiple events, but interpreting the results would
become difcult because of the impact of an explanatory variable on the hazard rate of a given event, which is a non-linear function of its impact on the hazard rates of
other events, as well as of their respective baseline hazards.
Table 1
Sample. Post-offering scenarios of 212 funded offerings on Crowdcube by funding year. The observation date is end of April 2017.
SEO M&A Active Failed
Year Obs No. % No. % No. % No. %
2011 7 4 57.1 0 0.0 1 14.3 2 28.6

2012 16 6 37.5 1 6.3 6 37.5 3 18.8
2013 33 15 45.5 1 3.0 4 12.1 13 39.4
2014 86 37 43.0 0 0.0 38 44.2 11 12.8
2015 70 12 17.1 1 1.4 48 68.6 9 12.9
Total 212 74 34.9 3 1.4 97 45.8 38 17.9
after the closing of Camden's initial equity offering, delivering an annualized internal rate of return of 111.9% to crowdfunding
investors.
On the contrary, 38 rms (17.9%) failed, with the highest failure rate associated with rms funded in 2013 (39.4%). In total, 97
rms (45.8%) were still operating but were not involved in any post-offering event. The proportion of active rms tended to in-
crease in the most recent years, as the likelihood of completing a post-offering event is negatively affected by the shortening ob-
servation window. We address this potential censoring issue in a robustness test where we exclude the most recent offerings (see
Section 6).
5.1. Univariate tests
We now describe the successfully crowdfunded rms in our sample. As reported in the rst two columns of Table 2, these
rms were on average 2.2 years old (median = 1.5) and most (53.3%) had positive sales at the time of listing. The percentage
of rms that employed non-executive directors or held patents was low (9% and 8%, respectively). On the contrary, three out
of four companies offered shares that carry voting rights to crowdfunding investors. The average number of these investors
was 145 and 10% of these offerings were closed within only 20 days of the offerings. Qualied investors backed only 6.6% of suc-
cessful offerings.
In the remaining columns of Table 2, we present the descriptive statistics of the rms across the four post-offering scenarios
(i.e., SEO, M&A, Active, Failed), and further distinguish SEOs between public and private. The table shows the average values and
reports the results of the univariate tests for the difference between rms in a given scenario and the rest of the sample.
Concerning the post-offering scenarios, we nd that rms that remained active were the oldest, with an average age of
2.8 years, while a rm's level of diversication did not signicantly vary by outcome. The proportion of rms with prior positive
sales was signicantly larger among SEOs (60.8%) and smaller among failures (28.9%) compared with the rest of the sample,
Table 2
Descriptive statistics. Variables in the Post-offering scenarios and SEOs panels are on average. While failures and M&As are censoring scenarios, rms with multiple SEOs
are categorized based on the rst event. Age is the age (in years) of the company. Diversication is the company's number of 4-digit SIC codes. Positive sales equals 1 if
the company has already reported positive sales (the table reports the percentage of rms with positive sales). Non-executive directors equals 1 if the company has at
least one non-executive director. Patents equals 1 if the company owns or is ling patents. Target capital is the amount of capital to be raised in the offering. Equity
offered is the fraction of equity offered. Voting rights equals 1 if voting rights are attached to the equity offered. Tax incentive equals 1 if the offering is eligible for
the Seed Enterprise Investment Scheme (SEIS) tax relief. All these variables are measured at the launch of the offering. No. investors is the number of investors who
participated in the offering. Quick success equals 1 if the target capital was reached within 20 days of the launch of the offering. Qualied investor equals 1 in case a
qualied investor (as identied from Crowdcube) participated in the offering. SEOs within 2 years is the number of SEOs completed by the rm within 2 years of
the closing date of the initial offering (the sample is restricted to offerings completed by the end of April 2015). Monetary values are in thousands of British pounds.
*, **, and *** indicate signicance at the 10%, 5%, and 1% levels, respectively, of the t-test for the difference in means between the corresponding group and the rest
of the sample (SEOs) in the left-hand (right-hand) side of the table. Z-test of equal proportions is used for dummy variables.
All sample Post-offering scenarios SEOs
(212 obs) SEOs M&A Active Failed Public Private
Mean Median (74 obs) (3 obs) (97 obs) (38 obs) (54 obs) (20 obs)
Age (years) 2.2 1.5 1.8* 1.0 2.8*** 1.5* 1.5** 2.7
Diversication (no.) 1.2 1.0 1.2 1.3 1.2 1.2 1.1 1.2
Positive sales (%) 53.3 60.8** 100.0 55.7 28.9*** 55.2 75.9
Non-executive directors (%) 9.0 14.4 66.6*** 5.5 3.0* 8.9** 29.2
Patents (%) 8.0 10.8 33.3** 5.2 7.9 11.3 9.4
Target capital (k) 197.9 100.0 187.7 553.3 226.7 116.1 164.5 250.2
Equity offered (%) 14.8 13.0 14.2 9.3 15.0 15.8 14.8 12.7
Voting rights (%) 75.5 62.2*** 100.0 81.4* 84.2 57.1 76.0
Tax incentive (%) 46.7 56.8 0.0 38.1 52.6 57.9 53.7
No. investors (no.) 144.9 105.0 141.8 778.0*** 149.8 88.3** 119.6** 201.8
Quick success (%) 10.4 12.2 0.0 11.3 5.3 14.8 5.0
Qualied investor (%) 6.6 10.8* 33.3* 5.2 0.0 1.8*** 35.1
SEOs within 2 years (no.) 1.3 1.2* 1.6
consistent with the view that the proven ability to generate revenue increases the likelihood of successful outcomes. Further, all
three of the rms that became M&A targets had positive sales at the launch of the initial offering. The largest proportion of rms
appointing non-executive directors and holding patents was associated with the two successful scenarios, namely M&A and SEO.
On the contrary, SEO rms exhibited the lowest propensity to offer voting shares. In terms of the results of the initial offering,
M&A rms had the highest average investor participation (778 investors), while failed rms had the lowest (88.3). This result
suggests that the degree of investor participation in the initial offering tends to predict the likelihood of a rm's post-offering out-
come. There was, however, no signicant difference across outcomes in the proportion of rms that quickly raised the target cap-
ital in their initial campaigns. The proportion backed by qualied investors tended to be higher among rms involved in
successful events, namely SEO (10.8%) and M&A (33.3%). Finally, SEO rms completed an average of 1.3 equity issues within
two years of the initial offering.
We next investigate whether different types of rms go through different types of SEOs in the SEO panel of Table 2. Firms that
pursued public SEOs were on average younger than those involved in private SEOs (1.5 vs. 2.7 years) and rarely had positive sales
at listing, although the difference between the two groups was not statistically signicant. Furthermore, they appointed non-
executive directors less frequently. These rms were also signicantly less able than private SEO rms to attract investors in
the initial offering in terms of both the overall number (119.6 vs. 201.8) and the presence of qualied investors (1.8% vs.
35.1%). The average number of equity issues completed by public SEO rms within two years was 1.2, lower than the 1.6 issues
associated with private SEO rms.
5.2. Multivariate tests
We now turn to a multivariate analysis to identify the determinants of the post-offering outcomes. Table 3 reports the results
of our competing risk regressions. The evidence from the rst step of the Heckman model conrms the results presented by prior
studies. Younger rms and those that had already reported positive sales were more likely to raise capital in crowdfunding
Table 3
Determinants of post-offering events. Two-step Heckman selection model on the determinants of post-offering scenarios. The rst step is a probit regression with the
success dummy as dependent variable. Competing offerings, dened as the log of 1 plus the number of offerings active and available at the launch date of the considered
offering, is the instrumental variable. The second step is a competing risks regression on post-offering scenarios. In SEO/M&A models, the hazard rate of completing a
seasoned offering or being acquired is the latent dependent variable, while failure is the competing event. In Failure models, the hazard rate of failure is the latent de-
pendent variable, while SEO and M&A are the competing events. Age, Target capital, and No. investors are in logarithm. Industry (1-digit SIC level) xed effects are in-
cluded. The sample is made of 212 initial equity offerings in Crowdcube. ***, **, and * indicate signicance at the 1, 5, and 10% levels respectively.
First step SEO/M&A Failure SEO/M&A Failure SEO/M&A Failure SEO/M&A Failure SEO/M&A Failure
(Probit) (1) (2) (3) (4) (5) (6) (7) (8) (9) (10)
Age 0.46*** 0.24* 0.19 0.23 0.19 0.23 0.27 0.27* 0.17 0.26 0.25
(3.96) (1.71) (1.00) (1.62) (1.01) (1.61) (1.46) (1.75) (0.93) (1.60) (1.39)
Diversication 0.11 0.28 0.38 0.26 0.38 0.34 0.33 0.29 0.43 0.34 0.37
(0.79) (1.09) (0.64) (1.03) (0.64) (1.37) (0.61) (1.14) (0.71) (1.39) (0.67)
Positive sales 0.74*** 0.78** 0.96** 0.84*** 0.97** 0.86*** 0.93* 0.80** 0.88* 0.93*** 0.85*
(3.55) (2.57) (1.97) (2.70) (1.99) (2.80) (1.90) (2.56) (1.92) (2.87) (1.80)
Non-executive dir. 0.10 1.22*** 0.17 1.39*** 0.18 1.26*** 0.30 1.09*** 0.54 1.26*** 0.42
(0.36) (3.33) (0.13) (3.65) (0.14) (3.33) (0.23) (2.64) (0.47) (2.76) (0.36)
Patents 0.28 1.17*** 0.06 1.33*** 0.07 1.28*** 0.17 1.12** 0.11 1.37*** 0.10
(0.89) (2.80) (0.10) (3.02) (0.12) (3.05) (0.25) (2.54) (0.19) (2.90) (0.15)
Target capital 0.41*** 0.20 0.36 0.37** 0.39 0.20 0.40 0.18 0.35 0.35* 0.40
(3.44) (1.45) (1.22) (1.97) (1.14) (1.44) (1.30) (1.28) (1.21) (1.78) (1.20)
Equity offered 0.16 1.08 0.47 1.56 0.42 1.88 0.63 1.11 0.25 2.46 0.28
(0.13) (0.70) (0.17) (0.99) (0.15) (1.16) (0.23) (0.69) (0.09) (1.40) (0.11)
Voting rights 0.50* 0.75** 1.07** 0.75** 1.08** 0.82*** 1.21** 0.76** 1.13** 0.83*** 1.26**
(1.89) (2.54) (2.22) (2.47) (2.23) (2.78) (2.15) (2.52) (2.30) (2.71) (2.19)
Tax incentive 0.34 0.65** 0.57 0.67** 0.57 0.65* 0.68* 0.66** 0.61 0.67* 0.72*
(1.46) (2.01) (1.39) (2.01) (1.39) (1.95) (1.67) (2.03) (1.47) (1.96) (1.76)
No. investors 0.49** 0.06 0.33 0.01
(2.02) (0.19) (1.33) (0.03)
Quick success 0.97** 1.40** 1.00*** 1.43**
(2.56) (2.00) (2.64) (2.02)
Qualied inv. 0.41 18.52*** 0.45 16.77***
(0.84) (24.24) (0.87) (21.63)
Mills ratio 0.15 1.53* 0.10 1.57* 0.30 1.62* 0.05 1.73** 0.13 1.83**
(0.34) (1.84) (0.23) (1.78) (0.67) (1.87) (0.10) (2.14) (0.28) (2.00)
Competing offerings 3.36***
(7.36)
Constant 23.22***
(8.25)
Industry xed effects Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes
Pseudo R-squared 0.33
Wald Chi-squared 729.6 52.9 765.1 52.7 925.2 66.5 735.0 1464.8 873.0 1162.6
campaigns, with both predictors being statistically signicant (p b 0.01). On the contrary, success was more difcult to achieve
when the capital to be raised was larger. The number of offerings active and available on Crowdcube at the launch date of the
considered offering was used as the instrumental variable, since it affects the probability of the campaign succeeding but not
the likelihood of the post-campaign outcomes. As expected, its effect on the likelihood of success was negative (p b 0.01).
We now move to the second step of the Heckman model, which is a competing risk regression on the post-offering scenarios.
We rst discuss the results of Models 1 and 2, which include only the rm- and offering-specic independent variables. We then
add our explanatory variables referring to the outcomes of the initial offering separately into Models 38 and nally test their
joint effects in Models 9 and 10. For ease of interpretation, we report coefcients instead of subhazard ratios in the results. A pos-
itive coefcient indicates that an increase in a given variable increases the hazard rate relative to its baseline level (i.e., when all
explanatory variables are set to zero), therefore making the occurrence of a given scenario more likely (i.e., making the time to
event shorter). Conversely, a negative coefcient indicates that an increase in the explanatory variable decreases the hazard
ratio and makes the occurrence of a given scenario less likely (i.e., makes the time to event longer).
Models 1 and 2 show a number of important predictors of the probability of pursuing an SEO or M&A that, as motivated
above, we interpret as successful outcomes. The results of Model 1 show that the presence of positive sales, non-executive direc-
tors, and patents increases a rm's likelihood of raising additional capital either in the form of equity issuance or through an ac-
quisition. First, the positive sales variable positively affects the probability of an SEO or M&A (p b 0.05), in line with its relevant
role played in fostering the success of crowdfunding campaigns. In terms of economic impact, the presence of prior revenue in-
creases the hazard rate of conducting an SEO or M&A by a factor of 2.18.13 Firms with traction (positive sales) at listing are also
less likely to fail (p b 0.05, Model 2), with a 62% decrease in the hazard rate of failure compared with revenue-less rms. This
evidence is in line with the role of traction as a proxy for the product market viability of rms going public (Chemmanur
et al., 2010).
Second, the presence of non-executive directors enhances the chances of becoming involved in SEOs or M&As (p b 0.01). The
magnitude of the coefcient implies that having at least a non-executive director on the board raises the hazard rate of being in-
volved in an SEO or M&A by 3.39 times.14 Third, we nd that successfully crowdfunded rms with patents are more likely to raise
capital in SEOs (p b 0.05). At rst glance, this is a puzzling result. Previous studies of equity crowdfunding offerings nd that pat-
ents are not a predictor of campaign success. Ahlers et al. (2015), for example, report that companies that register patents do not
have higher chances of securing funding on the Australian platform ASSOB. In a study closely related to the present one, Vismara
(2017) conrms that patents do not increase the success rate of offerings on Crowdcube. Likewise, in the rst step of our Heck-
man model, we nd that patents do not affect the probability of reaching the target capital. After the campaign, however, paten-
tee rms are 3.22 times more likely to carry out an SEO or M&A than other rms. Our results, combined with the evidence from
previous studies, are consistent with Rajan's (2012) model of standardization following differentiation. Rajan (2012) argues that
soft variables (e.g., the founder's human capital) are necessary to differentiate startups early on. To produce a signicant net pres-
ent value, ventures must be differentiated from the ordinary. However, over time, they will nd it increasingly difcult to raise
follow-on nance against differentiated assets. For this reason, an entrepreneur must commit to undertake a second transforma-
tion (standardization) that will make the human capital embodied in the rm replaceable. Property rights are at the core of this
standardization process, thereby providing outside nanciers with residual rights over the going-concern surplus.15
The results also show that offering voting shares and being eligible for tax incentives matter. Firms offering voting shares are
less likely to engage in SEOs or M&As (p b 0.05, Model 1) and more likely to fail (p b 0.05, Model 2). This result conrms the rel-
evance of delivering voting rights in crowdfunding, although this action does not directly inuence a campaign's probability of
success. Firms that benet from the SEIS tax shield face a higher likelihood of a successful outcome (p b 0.05), conrming the suc-
cess of scal policies designed to stimulate growth in the private equity industry. However, the structure of the offering exerts no
impact on the likelihood of SEO/M&A or failure. Lastly, the inverse Mills ratio is weakly or not signicant, suggesting that selection
bias does not represent a major concern in our analysis.
In Models 38, we add into our regression the variables measuring the effects of investor participation in the initial offering on
post-campaign outcomes. First, in Models 3 and 4 we include the log of the number of investors who backed each offering and
nd this variable to be a negative predictor of the probability of performing SEOs (p b 0.05). A one standard deviation increase
in this variable corresponds to a 38.7% decrease in the SEO/M&A hazard rate. This nding is consistent with a reduced monitoring
effect (Brennan and Franks, 1997), according to which the greater dispersion of outside holdings weakens new shareholders' in-
centive to monitor the rm's management, thereby decreasing the likelihood of a successful outcome. In addition, this evidence is
consistent with the possible reluctance of entrepreneurs to issue additional equity and further disperse the rm's ownership
structure. Second, in Models 5 and 6 we add the quick success dummy, equal to one if the target capital was raised within the
rst 20 days of the offering. Firms with quick success in the initial equity crowdfunding offering face a higher likelihood of a suc-
cessful outcome (p b 0.05, Model 5) and a lower likelihood of failure (p b 0.05, Model 6). Controlling for rm- and offering-
13
A one-unit change in the independent variable changes the hazard ratio by (e 1). In this case, the hazard rate of rms with positive sales is 118% higher than that
of rms with no prior sales.
14
This is likely to be an endogenous result, as rms that hire non-executives may be more prone to growth through external strategies.
15
Rajan's (2012) model extends the property rights theory developed by Grossman and Hart (1986), who refer to the residual rights of control conferred by own-
ership that cannot be determined by explicit contracts. Rajan (2012) reports a number of examples and ndings of studies that support this model. For instance, Kaplan
et al. (2009) nd that 46% of rms have patent rights at the business plan stage, rising to 60% at the time of the IPO and 66% soon after. More of the intellectual property
of the rm is embedded in formal patents as it undergoes subsequent nancing rounds. Further evidence is found in the increased patenting activity after the injection of
venture capital.
specic factors, the SEO/M&A hazard rate for these rms is 2.64 times higher than that for the rest of the sample, while the hazard
rate of failure is 75% lower. This result is consistent with the view that a favorable market assessment in the initial offering is a
positive signal for the future success of the rm. Third, in Models 7 and 8, we focus on the presence of qualied investors in the
initial offering. While their initial participation is not a signicant predictor of subsequent SEOs or M&As, their presence is strongly
associated with survivorship (p b 0.01, Model 8). Indeed, none of the rms they backed subsequently failed. This nding is con-
sistent with qualied investors possessing superior information that allows them to identify rms with more promising business
models. In addition, this nding indicates that qualied investors bring value added services that help rms reduce the risk of fail-
ure. Prior literature has extensively documented both the selection (Chan, 1983) and the treatment (Gompers and Lerner, 2001)
effects exerted by such investors (Colombo et al., 2016). Finally, Models 9 and 10 conrm the robustness of our results by jointly
testing the effects of the investor participation variables, with the exception of the number of investors, which loses statistical
signicance.
In Table 4, we replicate the type of competing risk analysis by considering private and public SEOs as the events of interest.
This allows us to discern the determinants of follow-on crowdfunding offerings from those of private equity capital injections.
As before, we rst present the baseline specication (Models 1 and 2), then add the investor participation variables separately
(Models 38), and nally test their joint effects (Models 9 and 10). The results of Model 1 show that younger rms (p b 0.01)
are more likely to raise capital through sequential crowdfunding campaigns, while rms offering voting shares are less likely to
do so (p b 0.01). Younger rms are arguably those that benet more from the progressive reduction in information asymmetry
fostered by a staged nancing strategy, while entrepreneurs whose control rights over the rm have already been reduced by
the sale of voting shares in the initial offering are presumably more reluctant to further dilute their control stake by launching
a second crowdfunding campaign. On the contrary, the results of Model 2 show that private equity is raised by rms with traction
(p b 0.01) and non-executive directors (p b 0.01). These results suggest that private equity investors tend to select rms with
higher product market viability, as proxied for by the presence of prior revenue, and structured corporate governance mecha-
nisms, consistent with Rajan's (2012) sequential model of differentiation and standardization.
Concerning the investor participation variables, we nd that the number of investors is negatively associated with the likeli-
hood of a further crowdfunding offering, although statistical signicance is weak (p b 0.10, Model 3). On the contrary, initial of-
ferings that quickly reach the target capital are more likely to be followed by a further campaign (p b 0.05, Model 5). This nding
supports the idea that a positive debut in the crowdfunding market increases an entrepreneur's likelihood of becoming a serial
Table 4
Private vs public SEOs. Second step of the Heckman model with competing risks regression on SEO type. While failures and M&As are censoring scenarios, rms with
multiple SEOs are categorized based on the rst event. In Public models, the hazard rate of completing a public seasoned offering is the latent dependent variable, with
private SEO, M&A and failure being the competing events. In Private models, the hazard rate of completing a private seasoned offering is the latent dependent variable,
with public SEO, M&A and failure being the competing events. Age, Target capital, and No. investors are in logarithm. Industry (1-digit SIC) xed effects are included. The
sample is made of 212 initial equity offerings in Crowdcube in the period 20112015. ***, **, and * indicate signicance at the 1, 5, and 10% levels respectively.
Public Private Public Private Public Private Public Private Public Private
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10)
Age 0.51*** 0.84* 0.50*** 0.83* 0.51*** 0.90** 0.46** 0.91 0.46** 1.00**
(2.84) (1.67) (2.79) (1.65) (2.73) (2.42) (2.49) (1.41) (2.35) (2.19)
Diversication 0.02 0.48 0.03 0.51 0.07 0.14 0.03 0.89* 0.06 0.43
(0.07) (0.96) (0.11) (1.01) (0.23) (0.26) (0.09) (1.70) (0.20) (0.80)
Positive sales 0.26 2.43*** 0.33 2.34*** 0.32 2.08*** 0.25 3.02*** 0.36 2.48**
(0.72) (2.77) (0.88) (2.61) (0.85) (2.59) (0.69) (2.59) (0.96) (2.42)
Non-executive dir. 0.32 2.76*** 0.12 2.69** 0.31 2.32*** 0.19 2.14** 0.06 1.86**
(0.44) (2.71) (0.17) (2.50) (0.42) (2.77) (0.24) (2.39) (0.07) (2.36)
Patents 0.61 1.51 0.83 1.40 0.73 1.29 0.67 1.28 1.03 1.24
(1.02) (1.62) (1.33) (1.54) (1.22) (1.45) (1.11) (1.05) (1.60) (1.24)
Target capital 0.15 0.57* 0.35* 0.42 0.14 0.28 0.17 0.43 0.40* 0.26
(0.91) (1.67) (1.68) (0.92) (0.84) (0.91) (1.05) (1.08) (1.91) (0.63)
Equity offered 1.02 3.19 1.55 3.06 1.93 1.93 1.13 1.02 2.77 1.22
(0.54) (0.80) (0.82) (0.74) (1.00) (0.60) (0.60) (0.28) (1.40) (0.36)
Voting rights 0.98*** 0.25 0.96** 0.21 1.14*** 0.09 0.96*** 0.58 1.11*** 0.11
(2.66) (0.42) (2.57) (0.34) (3.07) (0.15) (2.63) (0.76) (2.92) (0.17)
Tax incentive 0.45 2.03* 0.43 2.08* 0.45 1.80* 0.43 2.43* 0.42 2.33**
(1.47) (1.87) (1.37) (1.89) (1.40) (1.88) (1.43) (1.90) (1.29) (2.19)
No. investors 0.46* 0.33 0.52** 0.06
(1.72) (0.64) (2.13) (0.15)
Quick success 1.18*** 0.53 1.18*** 0.27
(2.93) (0.45) (2.98) (0.22)
Qualied inv. 1.20 2.14*** 1.17 2.02***
(1.06) (3.16) (0.99) (3.43)
Mills ratio 0.25 0.59 0.30 0.69 0.11 0.36 0.17 0.11 0.12 0.08
(0.41) (0.78) (0.50) (0.84) (0.19) (0.50) (0.27) (0.16) (0.20) (0.13)
Industry xed effects Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes
Wald Chi-squared 846.7 1379.2 672.6 1298.2 718.5 1021.8 842.3 1900.6 740.3 1049.6
Observations 212 212 212 212 212 212 212 212 212 212
Table 5
Count model for post-offering events. Second step of the Heckman model with zero-inated negative binomial regression on the number of events (M&As or SEOs)
completed within two years of the closing date of the initial offering. Age, Target capital, and No. investors are in logarithm. Industry (1-digit SIC) xed effects are in-
cluded. The sample is made of 173 initial equity offerings in Crowdcube funded from 2011 to April 30, 2015. ***, **, and * indicate signicance at the 1, 5, and 10% levels
respectively.
(1) (2) (3) (4) (5)
Age 0.39* 0.37* 0.32 0.41** 0.33

(1.88) (1.79) (1.58) (2.01) (1.62)
Diversication 0.24 0.25 0.19 0.18 0.13
(0.78) (0.84) (0.64) (0.61) (0.45)
Positive sales 0.30 0.28 0.34 0.24 0.26
(1.02) (0.94) (1.21) (0.76) (0.86)
Non-executive dir. 1.05** 1.08** 1.13** 0.89* 0.98*
(2.42) (2.41) (2.54) (1.85) (1.90)
Patents 0.46 0.35 0.50 0.41 0.38
(1.02) (0.74) (1.15) (0.91) (0.83)
Target capital 0.22 0.12 0.19 0.19 0.06
(1.41) (0.62) (1.18) (1.20) (0.31)
Equity offered 6.37*** 6.03** 5.72** 6.03*** 5.01**
(2.72) (2.55) (2.53) (2.66) (2.25)
Voting rights 0.66** 0.66** 0.77** 0.64** 0.76**
(2.20) (2.22) (2.47) (2.12) (2.41)
Tax incentive 0.77** 0.78** 0.72* 0.84** 0.79**
(2.12) (2.17) (1.94) (2.19) (2.03)
No. investors 0.23 0.19
(0.92) (0.75)
Quick success 0.76** 0.83**
(2.21) (2.39)
Qualied inv. 0.93** 0.99**
(2.09) (2.21)
Mills ratio 0.91 0.95 0.83 0.90 0.81
(1.53) (1.54) (1.37) (1.55) (1.34)
Constant 0.13 0.12 0.16 0.43 0.23
(0.05) (0.05) (0.06) (0.17) (0.09)
Ln(alpha) 0.12 0.13 0.16 0.06 0.27
(0.34) (0.37) (0.29) (0.16) (0.49)
Industry xed effects Yes Yes Yes Yes Yes
Wald Chi-squared 37.61 37.94 43.06 39.66 51.55
Observations 173 173 173 173 173
crowdfunder (Buttic et al., 2017). The economic impact is sizeable, as quickly reaching the target in the initial campaign in-
creases the hazard ratio of conducting a follow-on campaign by 3.2 times. Finally, and unsurprisingly, private equity investors
tend to target rms whose initial offerings are backed by qualied investors (p b 0.01, Model 8). The economic impact of their
presence is remarkable, increasing by 8.5 times the hazard rate of a private equity injection. All results are conrmed in the
full model specications (Models 9 and 10).
5.3. Consecutive SEOs
In our sample, 27% of SEO rms (20 observations) had conducted multiple SEOs within two years of the initial crowdfunding
offering. To understand which types of rms engage in a higher number of transactions, we estimate a zero-inated negative bi-
nomial regression with a company's number of SEOs within two years of the initial offering as the dependent variable. The evi-
dence reported in Table 5 shows that rms that have non-executive directors (p b 0.05) and are eligible for the SEIS tax shield
(p b 0.05) pursue a larger number of SEOs. This evidence conrms the role played by these two factors in fostering a rm's suc-
cess after its initial offering. On the contrary, the proportion of equity offered (p b 0.01) and sale of voting shares (p b 0.05) in the
initial campaign are negatively correlated with the number of SEOs. This evidence again concurs with the previously described
reluctance of entrepreneurs to further dilute their stake if they have already given up part of their control in the initial offering.
Furthermore, the proportion of equity offered can be interpreted as a signal of rm quality in light of the commitment of the orig-
inal shareholders (Ahlers et al., 2015; Vismara, 2016), as these rms encounter greater difculties when conducting additional
SEOs. The investor participation variables conrm their effects, with initial offerings that are quickly successful (p b 0.05) and
those that attract qualied investors (p b 0.05) being followed by more SEOs. In terms of economic impact, the coefcients in
Model 5 imply that the expected number of SEOs by quickly successful rms is 2.29 times the expected number of SEOs by
rms whose initial campaign is not as successful, and the same factor increases to 2.69 for rms backed by qualied investors.16
The only exception is the number of investors, whose coefcient is no longer signicant.
16
A one-unit change in the independent variable changes the expected number of SEOs by exp.().
Table 6
Robustness tests on the determinants of post-offering events. Competing risks regression on post-offering scenarios (second step of the same Heckman model
employed in Table 3). In Models 12, offerings completed in 2015 are excluded. In Models 34, the quick success dummy is replaced by the number of days of duration
of the initial offering. In Models 56, a dummy for the presence of the Enterprise Investment Scheme (EIS) tax incentive is added. In Models 78, the voting rights dum-
my is replaced by the dual class shares dummy, equal to 1 if both A and B shares are offered to investors. Age, Target capital, No. investors and Offering duration are in
logarithm. Industry (1-digit SIC level) xed effects are included. ***, **, and * indicate signicance at the 1, 5, and 10% levels respectively.
2015 excluded Duration included EIS tax incentive Dual class shares
SEO/M&A Failure SEO/M&A Failure SEO/M&A Failure SEO/M&A Failure
(1) (2) (3) (4) (5) (6) (7) (8)
Age 0.22 0.25 0.29* 0.19 0.28* 0.30 0.26 0.27

(1.28) (1.05) (1.76) (1.04) (1.74) (1.62) (1.59) (1.44)
Diversication 0.37 0.55 0.32 0.42 0.47* 0.32 0.34 0.32
(1.45) (0.72) (1.27) (0.73) (1.74) (0.59) (1.39) (0.61)
Positive sales 0.93*** 1.06* 0.89*** 0.88* 0.95*** 0.85* 0.93*** 0.78*
(2.91) (1.82) (2.82) (1.88) (2.93) (1.79) (2.76) (1.67)
Non-executive dir. 1.20** 1.24 1.35*** 0.55 1.21*** 0.38 1.26*** 0.48
(2.26) (1.04) (3.01) (0.47) (2.68) (0.32) (2.75) (0.41)
Patents 1.33*** 0.62 1.17** 0.08 1.30*** 0.12 1.36*** 0.13
(2.59) (0.90) (2.35) (0.14) (2.73) (0.18) (2.89) (0.18)
Target capital 0.43* 0.69* 0.35* 0.38 0.39* 0.38 0.36* 0.40
(1.79) (1.95) (1.81) (1.16) (1.91) (1.15) (1.80) (1.23)
Equity offered 3.19 0.10 1.98 0.23 2.55 0.16 2.48 0.46
(1.61) (0.03) (1.16) (0.09) (1.47) (0.06) (1.40) (0.18)
Voting rights 0.77** 1.51** 0.72** 1.12** 0.71** 1.36**
(2.49) (2.14) (2.32) (2.14) (2.25) (2.26)
Dual class shares 0.42 0.18
(1.12) (0.36)
Tax incentive (SEIS) 0.61* 0.74 0.63* 0.61 1.23*** 0.54 0.67* 0.63
(1.75) (1.43) (1.90) (1.51) (2.90) (1.22) (1.90) (1.55)
Tax incentive (EIS) 0.91** 0.44
(2.20) (0.83)
No. investors 0.33 0.03 0.39* 0.04 0.38* 0.01 0.33 0.00
(1.11) (0.09) (1.74) (0.12) (1.72) (0.02) (1.33) (0.01)
Quick success 1.03** 1.45** 1.01*** 1.49** 1.00*** 1.44**
(2.53) (2.02) (2.59) (2.08) (2.64) (2.12)
Offering duration 0.01* 0.01
(1.70) (1.03)
Qualied inv. 0.05 14.61*** 0.42 23.63*** 0.65 17.65*** 0.45 19.47***
(0.09) (22.55) (0.82) (29.36) (1.33) (27.66) (0.87) (27.49)
Mills ratio 0.17 1.33 0.10 1.75** 0.36 1.91** 0.14 1.78*
(0.33) (1.55) (0.19) (2.02) (0.74) (2.18) (0.29) (1.96)
Industry xed effects Yes Yes Yes Yes Yes Yes Yes Yes
Wald Chi-squared 702.2 1153.0 773.7 945.4 948.0 1319.8 977.4 1017.6
Observations 142 142 212 212 212 212 212 212
6. Robustness tests
In this section, we present the results of a number of additional tests that aimed to check the robustness of our evidence on
the determinants of the post-offering scenarios. In particular, we address the following four issues. First, we repeat our analysis
after excluding the most recent offerings to alleviate potential censoring concerns. The shorter observation window associated
with more recent offerings indeed underestimates their likelihood of being involved in subsequent events. Second, we replace
the quick success dummy with a continuous variable that measures the duration of the initial offering (in days). The average du-
ration in our sample is 53 days. Third, since initial offerings can be eligible for two different and not mutually exclusive tax incen-
tive schemes, namely the EIS and SEIS (for which we already control), we test whether eligibility for the EIS also plays a role. In
particular, 74% of the offerings in our sample benet from the EIS scheme. Fourth, while we have already accounted for the choice
between the sale of voting and non-voting shares, approximately 65% of our sample rms offer dual class shares. We therefore
control for whether this decision affects the subsequent outcomes. We perform these four robustness tests both in the analysis
of the determinants of the post-campaign scenarios and with respect to the distinction between public and private SEOs.
Table 6 presents evidence on the determinants of the post-campaign scenarios by estimating the same competing risks regres-
sion model as the one presented in Section 5. In Models 1 and 2, we exclude the 70 offerings completed in 2015. As for the like-
lihood of conducting an SEO or M&A, the positive sales, non-executive directors, patents, and voting rights variables continue to
be strong predictors. Among the measures of investor participation, the role of the quick success dummy is also conrmed. At the
same time, traction and the sale of voting shares are still negatively and positively associated with the hazard ratio of failure, re-
spectively, and the role played by the presence of qualied investors persists. These ndings indicate that, overall, our evidence is
robust to potential censoring concerns. In Models 3 and 4, the quick success dummy is replaced with the offering duration var-
iable, computed as the log of the number of days of the initial offering. The results suggest that the effect of duration concurs
Table 7
Robustness tests on public vs. private SEOs. Competing risks regression on SEO type (second step of the same Heckman model employed in Table 4). In Models 12,
offerings completed in 2015 are excluded. In Models 34, the quick success dummy is replaced by the number of days of duration of the initial offering. In Models
56, a dummy for the presence of the Enterprise Investment Scheme (EIS) tax incentive is added. In Models 78, the voting rights dummy is replaced by the dual class
shares dummy, equal to 1 if both A and B shares are offered to investors. Age, Target capital, No. investors and Offering duration are in logarithm. Industry (1-digit SIC
level) xed effects are included. ***, **, and * indicate signicance at the 1, 5, and 10% levels respectively.
2015 excluded Duration included EIS tax incentive Dual class shares
Public Private Public Private Public Private Public Private
(1) (2) (3) (4) (5) (6) (7) (8)
Age 0.57*** 1.69** 0.38* 0.85* 0.37* 0.75* 0.36* 0.90**

(2.82) (2.24) (1.91) (1.81) (1.81) (1.72) (1.78) (2.07)
Diversication 0.08 0.86 0.27 0.46 0.27 0.69 0.22 0.41
(0.25) (1.35) (0.92) (0.88) (0.86) (1.12) (0.78) (0.78)
Positive sales 0.29 4.00*** 0.53 2.58** 0.58 2.57** 0.57 2.54**
(0.77) (3.00) (1.48) (2.57) (1.54) (2.50) (1.45) (2.37)
Non-executive dir. 0.40 2.86** 0.51 1.88** 0.31 1.77** 0.39 1.78**
(0.50) (2.35) (0.69) (2.19) (0.37) (2.36) (0.48) (2.15)
Patents 0.93 2.42* 1.11* 1.13 1.16* 1.36 1.25* 1.34
(1.40) (1.90) (1.70) (1.05) (1.72) (1.40) (1.90) (1.31)
Target capital 0.55** 0.10 0.40* 0.31 0.42* 0.32 0.39* 0.31
(1.99) (0.20) (1.91) (0.67) (1.93) (0.60) (1.84) (0.71)
Equity offered 4.44** 1.27 1.80 1.52 2.34 0.65 2.07 1.83
(2.05) (0.32) (0.92) (0.48) (1.16) (0.18) (1.04) (0.52)
Voting rights 0.97** 0.15 1.00*** 0.04 1.11*** 0.06
(2.55) (0.19) (2.80) (0.06) (2.98) (0.09)
Dual class shares 0.66 0.21
(1.33) (0.25)
Tax incentive (SEIS) 0.33 3.35** 0.57* 2.22** 0.99** 3.30*** 0.62* 2.36**
(0.96) (2.45) (1.69) (2.11) (2.07) (2.64) (1.65) (2.30)
Tax incentive (EIS) 0.54 1.78**
(1.10) (2.39)
No. investors 0.41 0.09 0.50* 0.15 0.46* 0.22 0.44 0.10
(1.10) (0.18) (1.89) (0.37) (1.72) (0.51) (1.63) (0.21)
Quick success 1.10*** 0.29 1.19*** 0.27 1.18*** 0.31
(2.62) (0.24) (2.84) (0.18) (2.85) (0.23)
Offering duration 0.02** 0.01
(2.32) (0.86)
Qualied inv. 1.40 2.10** 1.19 2.00*** 0.90 2.34*** 1.03 1.94***
(1.16) (2.45) (0.93) (3.30) (0.73) (3.35) (0.83) (3.09)
Mills ratio 0.01 0.12 0.03 0.08 0.09 0.28 0.03 0.01
(0.01) (0.16) (0.05) (0.11) (0.15) (0.33) (0.04) (0.01)
Industry xed effects Yes Yes Yes Yes Yes Yes Yes Yes
Wald Chi-squared 703.4 1084.1 632.1 2147.9 792.6 1931.4 649.5 2125.9
Observations 142 142 212 212 212 212 212 212
with that of the quick success dummy, since slower offerings are less likely to be followed by a successful outcome, although sta-
tistical signicance decreases from the 5% to the 10% level. In Models 5 and 6, the EIS tax incentive dummy is added into the set of
explanatory variables. The results show that consistent with the previous evidence on the positive role played by the SEIS tax ben-
et on post-offering success, eligibility for the EIS tax incentive signicantly increases the likelihood of an SEO or M&A. Finally,
Models 7 and 8 test the role played by the issuance of dual class shares through the dual class shares dummy, with the estimates
found to be not statistically signicant.
Table 7 presents the results of the same set of robustness tests in the analysis of public vs. private SEOs. The evidence in
Models 1 and 2 indicates that after excluding the most recent offerings, the role played by the previously described predictors
of the occurrence of public and private SEOs is largely conrmed. Models 3 and 4 conrm the evidence that offerings that reached
the funding target more quickly tend to be followed by a further crowdfunding offering, as shown by the negative and signicant
coefcients of the duration variable. Models 5 and 6 show that in addition to the SEIS, the EIS tax incentive signicantly increases
the likelihood of receiving a private equity injection. Finally, Models 7 and 8 show that the issuance of dual class shares does not
affect the occurrence of the different types of SEOs.
7. Conclusions
This is the rst study to examine the post-offering outcomes of successful equity crowdfunding campaigns. We nd that a sig-
nicant proportion of companies that raise funds through crowdfunding go on to raise further capital. While this does not neces-
sarily provide initial crowdfunding investors with a monetary return, it crucially indicates that the prospect of a return does exist.
On the contrary, they face a 18% probability of losing their money by investing in rms that fail soon after the offering. However,
currently, we acknowledge caution in reaching conclusions on the failure rate of crowdfunded rms because this number is likely
to change as the post-offering observation window becomes longer.
This study thus offers novel evidence of the factors associated with positive outcomes and failures. For instance, we nd that
the degree of investor participation in the initial offering has important implications for a rm's future prospects. In particular,
rms backed by a larger number of investors are less likely to issue further equity, while those that raise the target capital
more quickly tend to return to the platform by launching a follow-on crowdfunding offering. In addition, the participation of qual-
ied investors such as VCs or BAs in the initial offering is a strong predictor of the rm's ability to survive in the long term.
The implications of this study, as discussed above, are mainly for investors. However, our ndings also generate interesting
implications for platform managers and policymakers. For instance, the data on entrepreneurs that use equity crowdfunding sug-
gests that more follow-on offerings are associated with the appointment of a non-executive in the board of directors. With respect
to policy implications, our data highlights the fact that rms beneting from tax incentives face a higher probability of raising ad-
ditional capital in SEOs, especially through private equity injections. This result points to the success of Britain's scal policies,
which could serve as a reference for other countries when discussing ways in which to foster crowdfunding. Most importantly,
our results provide insights into how to lessen concerns that could undermine the development of equity crowdfunding markets,
or even lead them to disappear altogether. For instance, their long-term success would be enhanced if platforms were to track
previous campaigns. At present, there is no central repository for such information and the platforms themselves offer varying
levels of disclosure.
Appendix A. Correlation matrix. ***, **, and * indicate signicance at the 1, 5, and 10% levels respectively for the difference from
zero of the correlation coefcients
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11)
(1) Age 1
(2) Diversication 0.01 1
(3) Positive sales 0.22*** 0.05 1
(4) Non-executive directors 0.12* 0.03 0.16** 1
(5) Patents 0.02 0.04 0.03 0.03 1
(6) Target capital 0.27*** 0.01 0.34*** 0.24*** 0.06 1
(7) Equity offered 0.22*** 0.06 0.12* 0.10 0.08 0.15** 1
(8) Voting rights 0.04 0.05 0.02 0.03 0.05 0.04 0.01 1
(9) SEIS 0.44*** 0.11 0.37*** 0.13* 0.07 0.42*** 0.07 0.12 1
(10) No. investors 0.20*** 0.03 0.27*** 0.27*** 0.12* 0.63*** 0.05 0.1 0.26*** 1
(11) Quick success 0.11 0.07 0.12* 0.05 0.01 0.05 0.03 0.05 0.12* 0.07 1
(12) Qualied investor 0.13* 0.08 0.21*** 0.25*** 0.01 0.21*** 0.06 0.03 0.17** 0.17** 0.09
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CORFIN-01292; No of Pages 17

Journal of Corporate Finance xxx (2017) xxxxxx

Contents lists available at ScienceDirect

Journal of Corporate Finance

Does success bring success? The post-offering lives of

2.2. Public SEOs

2.3. Private SEOs

2.5. Qualied investors

3. Equity crowdfunding in the United Kingdom

4.2. Sample and data

SEO M&A Active Failed

Year Obs No. % No. % No. % No. %

2011 7 4 57.1 0 0.0 1 14.3 2 28.6

5.1. Univariate tests

All sample Post-offering scenarios SEOs

(212 obs) SEOs M&A Active Failed Public Private

5.2. Multivariate tests

(1) (2) (3) (4) (5)

Age 0.39* 0.37* 0.32 0.41** 0.33

5.3. Consecutive SEOs

SEO/M&A Failure SEO/M&A Failure SEO/M&A Failure SEO/M&A Failure

(1) (2) (3) (4) (5) (6) (7) (8)

Age 0.22 0.25 0.29* 0.19 0.28* 0.30 0.26 0.27

Public Private Public Private Public Private Public Private

(1) (2) (3) (4) (5) (6) (7) (8)

Age 0.57*** 1.69** 0.38* 0.85* 0.37* 0.75* 0.36* 0.90**

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Age 0.57* 1.69 0.38* 0.85* 0.37* 0.75* 0.36* 0.90**