Individual Investors’ Access to Crowdinvesting: Two Regulatory Models

  • John Armour
  • Luca Enriques


Crowdinvesting—raising many small contributions of capital from individual funders via specialized online platforms—is a burgeoning phenomenon. This chapter first highlights the perils to which individual investors are exposed when they access these platforms. Next, it describes the legal regime in two sample jurisdictions, the US with its tradition of high-fixed-cost, disclosure-intensive securities laws that had to be tweaked to make equity crowdfunding viable, and the UK, which has early on provided for a nimble set of rules for the same. Finally, the chapter offers some thoughts on the merits of introducing a lighter regime for equity crowdfunding.


  1. Agrawal, Ajay, Christian Catalini, and Avi Goldfarb. 2010. Entrepreneurial Finance and the Flat-World Hypothesis: Evidence from Crowd-Funding Entrepreneurs in the Arts. NET Institute Working Paper No. 10-08.Google Scholar
  2. ———. 2014. Some Simple Economics of Crowdfunding. Innovation Policy and the Economy 14: 63–97.CrossRefGoogle Scholar
  3. Armour, John, and Luca Enriques. 2017. The Promise and Perils of Crowdfunding. Between Corporate Finance and Consumer Contracts. Modern Law Review (forthcoming).Google Scholar
  4. Belleflamme, Paul, Thomas Lambert, and Armin Schwienbacher. 2014. Crowdfunding: Tapping the Right Crowd. Journal of Business Venturing 29: 585–609.CrossRefGoogle Scholar
  5. Belleflamme, Paul, Nessrine Omrani, and Martin Peitz. 2015. The Economics of Crowdfunding Platforms. Information Economics and Policy 33: 11–28.CrossRefGoogle Scholar
  6. Black, Bernard S. 2001. The Legal and Institutional Preconditions for Strong Securities Markets. UCLA Law Review 48: 781–855.Google Scholar
  7. Coffee, John C. 2006. Gatekeepers: The Professions and Corporate Governance. Oxford: Oxford University Press on Demand.Google Scholar
  8. Colombo, Massimo G., Chiara Franzoni, and Cristina Rossi-Lamastra. 2015. Internal Social Capital and the Attraction of Early Contributions in Crowdfunding. Entrepreneurship Theory and Practice 39: 75–100.CrossRefGoogle Scholar
  9. Cumming, Douglas J., Lars Hornuf, Moein Karami, and Denis Schweizer. 2016. Disentangling Crowdfunding from Fraudfunding. Social Science Research Network. Accessed 20 Feb 2017.
  10. Dorff, Michael B. 2014. The Siren Call of Equity Crowdfunding. Journal of Corporate Law 39: 493–524.Google Scholar
  11. European Securities. 2014. Opinion: Investment-Based Crowdfunding. Accessed 20 Feb 2017.
  12. European Securities and Markets Authority. 2013. Guidelines on Key Concepts of the AIFMD. Last modified 13 Aug 2013.
  13. Financial Conduct Authority. 2013. The FCA’s Regulatory Approach to Crowdfunding (and Similar Activities). Last modified Oct 2013.
  14. ———. 2014. Policy Statement 14/4, The FCA’s Regulatory Approach to Crowdfunding Over the Internet, and the Promotion of Non-Readily Realisable Securities by Other Media: Feedback to CP13/13 and Final Rules. Last modified Mar 2014.
  15. Fried, Jesse M., and Mira Ganor. 2006. Agency Costs of Venture Capital Control in Startups. New York University Law Review 81: 967–1025.Google Scholar
  16. Gilson, Ronald J. 2010. Locating Innovation: The Endogeneity of Technology, Organizational Structure, and Financial Contracting. Columbia Law Review 110: 885–917.Google Scholar
  17. Hall, Bronwyn H. 2011. Innovation and Productivity. National Bureau of Economic Research. Accessed 20 Feb 2017.
  18. Hazen, Thomas Lee. 2014. Crowdfunding or Fraudfunding? Social Networks and the Securities Laws—Why the Specially Tailored Exemption Must Be Conditioned on Meaningful Disclosure. North Carolina Law Review 90: 1735–1770.Google Scholar
  19. Hornuf, L., and M. Neuenkirch. 2017. Pricing Shares in Equity Crowdfunding. Small Business Economics 48: 795–811.CrossRefGoogle Scholar
  20. Hornuf, Lars, and Armin Schwienbacher. 2016. Crowdinvesting—Angel Investing for the Masses? In Handbook of Research on Venture Capital, ed. C. Mason and H. Landström, vol. 3, 381–397. Cheltenham: Edward Elgar Publishing.Google Scholar
  21. ———. 2017. Should Securities Regulation Promote Crowdinvesting. Small Business Economics 49: 579–593.Google Scholar
  22. Hurt, Christine. 2015. Pricing Disintermediation: Crowdfunding and Online Auction IPOs. University of Illinois Law Review: 217–261.Google Scholar
  23. Ibrahim, Darian M. 2008. The (Not So) Puzzling Behavior of Angel Investors. Vanderbilt Law Review 61: 1405–1452.Google Scholar
  24. ———. 2010. Financing the Next Silicon Valley. Washington University Law Review 87: 717–762.Google Scholar
  25. ———. 2015. Equity Crowdfunding: A Market for Lemons? Minnesota Law Review 100: 561–607.Google Scholar
  26. Kogan, Leonid, Dimitris Papanikolaou, Amit Seru, and Noah Stoffman. 2012. Technological Innovation, Resource Allocation, and Growth. National Bureau of Economic Research. Accessed 20 Feb 2017.
  27. Ley, Andy, and Scott Weaven. 2011. Exploring Agency Dynamics of Crowdfunding in Start-Up Capital Financing. Academy of Entrepreneurship Journal 17: 85–110.Google Scholar
  28. Massolution. 2015. 2015CF. The Crowdfund Industry Report. Accessed 7 Mar 2017.
  29. Morrissette, Stephen G. 2007. A Profile of Angel Investors. Journal of Private Equity 10: 52–66.CrossRefGoogle Scholar
  30. Nanda, Ramana, and Matthew Rhodes-Kropf. 2013. Investment Cycles and Startup Innovation. Journal of Financial Economics 110: 403–418.CrossRefGoogle Scholar
  31. Oranburg, Seth C. 2015. Bridgefunding: Crowdfunding and the Market for Entrepreneurial Finance. Cornell Journal of Law and Public Policy 15: 397–452.Google Scholar
  32. Pope, Nikki D. 2011. Crowdfunding Microstartups: It’s Time for the Securities and Exchange Commission to Approve a Small Offering Exemption. University of Pennsylvania Journal of Business Law 13: 973–1002.Google Scholar
  33. Securities and Exchange Commission. 2015. SEC Adopts Rules to Permit Crowdfunding-Proposes Amendments to Existing Rules to Facilitate Intrastate and Regional Securities Offerings. October 30. Accessed 07 Mar 2017.
  34. Weinstein, Ross S. 2013. Crowdfunding in the U.S. and Abroad: What to Expect When You’re Expecting. Cornell International Law Journal 46: 427–453.Google Scholar
  35. Wong, Andrew, Mihir Bhatia, and Zachary Freeman. 2009. Angel Finance: The Other Venture Capital. Strategic Change 18: 221–230.CrossRefGoogle Scholar

Copyright information

© The Author(s) 2018

Authors and Affiliations

  • John Armour
    • 1
  • Luca Enriques
    • 1
  1. 1.Faculty of LawUniversity of OxfordOxfordUK

Personalised recommendations