Abstract
Over the past decade, the equity crowdfunding (ECF) market has become a crucial source of financing for early-stage and young entrepreneurs seeking to raise funds for their projects. As a novel market, ECF has been viewed as a “laboratory” for revisiting and refining financial theories and empirical evidence. While the ECF literature has developed rapidly alongside market growth, important questions in both the pre-campaign and post-campaign phases remain underexplored. In the pre-campaign phase, existing research has predominantly focused on fundraising success indicators, funding dynamics, and the functioning of the success factors of ECF platforms. However, share pricing behaviour has received limited attention. In the post-fundraising phase, while ECF literature increasingly investigates post-campaign outcomes, there is a noticeable gap in understanding how ECF firms with venture capitalists (VCs) and business angels (BAs) differ from those without such investors. The thesis addresses these gaps from three perspectives: (i) the value relevance of financial and non-financial information in ECF share pricing behaviours, (ii) the impact of ECF family firms on share prices, and (iii) the influence of VCs and BAs on the post-fundraising outcomes of ECF firms.
Chapter 2 investigates the determinants of share pricing in ECF, a market in which pricing is entrepreneur-led (rather than investor-negotiated) and in which intermediary influences are limited. Using a dataset of 1,536 campaigns launched on Crowdcube and Republic Europe (formerly Seedrs) between 2011 and 2023, the study examines the role of financial and non-financial information in shaping pre-money valuations set by entrepreneurs. The findings reveal that both financial factors (i.e., cash holdings, non-cash assets, long-term debt, and profitability) and non-financial factors (i.e., team characteristics, prior experience, educational background, patents, and professional investor backing) are significantly associated with valuations. Specifically, financial information accounts for 17.90% of the variation in pre-money valuation, while non-financial information explains 6.10%. The influence of financial and non-financial factors persists across funding rounds and irrespective of whether firms disclose audited financial statements. Firms without financial statements offer deep valuation discounts. Overall, the findings demonstrate that even in settings characterized by weak investor pricing power and limited intermediary involvement, both financial and nonfinancial information remain systematically linked to share pricing decisions.
Chapter 3 explores share pricing behaviours of family firms under the impact of socioemotional wealth (SEW) in the ECF market. An analysis of 2,190 UK ECF campaigns reveals that family firms generally underprice their shares relative to non-family firms. This trend is especially pronounced in early-stage firms or firms where chief executive officers (CEOs) have entrepreneurial experience. Additionally, financial leverage moderates the relationship between family firms and share prices. This study offers novel insights into the existing literature on SEW, family firms and ECF. The study contributes to the limited evidence regarding whether, and if so, to what extent SEW influences share pricing behaviours within the entrepreneurship landscape, where firms remain owned and managed by their founders while navigating competing goals under significant uncertainty.
Chapter 4 investigates the role of venture capitalists (VCs) and business angels (BAs) in the post-campaign performance of ECF firms. Analyzing 1,373 UK ECF firms, the study examines post-campaign outcomes, including firm size, financial performance, innovation, and future entrepreneurial finance events like follow-on funding, mergers and acquisitions (M&As), and initial public offerings (IPOs). The results show both VC- and BA-backed ECF firms exhibit lower innovation than matched ECF firms without such investors. There are limited other differences with non-backed ECF firms, except that BA-backed-only ECF firms are larger post-campaign. ECF firms with multiple investors of the same type are larger post-campaign, but they have fewer granted patents, while ECF firms backed by distinct investor types have fewer employees and fewer patents. However, ECF firms with VCs and/or BAs, except for BA-backed-only ECF firms, all outperform ECF firms without such investors in future entrepreneurial finance events. The findings offer new evidence on the heterogeneous effects of VCs and BAs, addressing calls to desegment the entrepreneurial finance literature and explore investor co-participation.