Responding to the Crowd: How Online Investor – Entrepreneur Discussions Inform Equity Crowdfunding Decisions
Crowdfunding is changing the landscape of entrepreneurial finance by democratizing the process and empowering the broader populous to participate in new venture funding. Based upon our analysis of a unique proprietary dataset, we propose that communication between entrepreneurs and would be investors impact ultimate investment decisions of the crowd. Unlike other forms of entrepreneur`s signals used during campaigns such as videos, documents, or product updates by the team, the impromptu discussions with the public cannot be prepared in advance, which is important for both parties.
From the investor side, the majority of whom are members of the general public, this communication serves as a form of vetting or due diligence. From the entrepreneur side, discussions with potential investors represent an essential way to respond to the feedback from the crowd and clarify any questions or uncertainty. Our analysis shows that investor – entrepreneur discussions matter for the success of campaigns and also that the focus of this communication concerning investor evaluation criteria evolves throughout a campaign.