The Wisdom of Crowds in Equity Crowdfunding -- A Randomized Field Experiment

Crowdfunding is a recent and rapidly growing method of raising funds for early-stage companies. It minimises the cost and effort involved in raising start-up funds compared to traditional equity funding methods such as venture capital investment. Very little systematic, non-survey research has been conducted into these methods of funding new ventures, however. ‘The wisdom of crowds in equity crowdfunding’ aims to fill this gap. Using the equity crowdfunding platform Seedrs, the project will ask the question ‘What motivates early-stage investors?’ There are many potential mechanisms at work, and this research will focus on the role of other investors and a ‘bandwagon effect’ on crowdfunding outcomes, building on previous attempts to gather data on these patterns with other crowdfunding sites such as AngelList and Kickstarter. Potential investors will be presented with randomised page layouts on the Seedrs website and their subsequent behaviour – specifically their investment decision – will be analysed based on these randomised conditions.

Policy implications 
Åstebro, T., Vulkan, N. (forthcoming). 'The Wisdom of Crowds in Equity Crowdfunding -- A Randomized Field Experiment'. Ongoing research.