Third-party signals in equity crowdfunding: the role of prior financing

  • Simon Kleinert
  • Christine Volkmann
  • Marc Grünhagen


Drawing on signaling theory, this study provides preliminary evidence that prior financing certifies firm quality to investors and reduces information asymmetries in equity crowdfunding. We examine 221 business plans and project descriptions of start-ups that ran equity crowdfunding campaigns on Crowdcube in 2017 and 2018. Almost half of the start-ups had previously raised funds through business angels, venture capitalists, crowdfunding, or grants. Prior financing positively affects campaign success. Overall, the effect is larger for firms backed by multiple investor types and for firms that have run successful crowdfunding before. To isolate the quality signal from the additional benefits related to an affiliation with other investors, we analyze whether the effect of prior financing is moderated by the uncertainty around a project. In support of a signaling effect, preliminary evidence suggests that prior financing is most relevant for firms in the uncertain seed stage. Among the different investor types, we find that, in particular, an affiliation with venture capitalists signals quality. Such an affiliation is more important for firms with low levels of human and social capital. Our study adds to the understanding of how equity crowdfunding interacts with traditional forms of entrepreneurial finance.


Entrepreneurial finance Securities issuance Equity crowdfunding Signaling theory Certification 

JEL classifications

L26 G40 G24 G23 



The authors are grateful for helpful comments of Silvio Vismara, three anonymous reviewers, as well as participants of the 6th Crowdinvesting Symposium at the Max Planck Institute for Innovation and Competition. Moreover, we thank Tobias Bürger and Kazem Mochkabadi for extensive discussions and valuable feedback.


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Copyright information

© Springer Science+Business Media, LLC, part of Springer Nature 2018
corrected publication 2019

Authors and Affiliations

  1. 1.Bergische Universität WuppertalWuppertalGermany

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