The equity crowdfunding market is worth over £50 million a year in the UK, doubling in size last year as an increasing number of individuals look for an alternative place to invest their capital. Despite its size however, there is very little research into market dynamics, the success of campaigns to attract funding and the associated risks.
Nir Vulkan, Associate Professor of Business Economics at Saïd Business School, University of Oxford, has been granted funding from the Kauffman Foundation and Nesta to explore the business of equity crowdfunding. Working with Thomas Åstebro from HEC Paris, the 18 month project will explore the criteria for success for crowdfunders and how investors make decisions on what projects to back. The study is being conducted on Seedrs, one of Europe’s leading equity crowdfunding platforms.
“We are looking to find out how investors react when presented with different information about an investment,” said Vulkan. “Do they respond more strongly to information about the founding team, to company what leads to failure, and this will have important implications for companies looking for investment of money and community expertise. More broadly our findings will be of great importance for regulators and governments both in the UK and internationally looking at the benefits and risks associated with the crowdfunding sector.”milestones, existing investors, or previous sales made? We will be able to understand what generates success and what leads to failure, and this will have important implications for companies looking for investment of money and community expertise. More broadly our findings will be of great importance for regulators and governments both in the UK and internationally looking at the benefits and risks associated with the crowdfunding sector.”
Seedrs was founded by Oxford MBA alumni Jeff Lynn and Carlos Silva, who worked on the idea for the company as part of their Entrepreneurship Project at Oxford Saïd, mentored by Vulkan, before it was launched in July 2012. According to the release, “On average over £2 million is invested through Seedrs per month, and in 2013 it became the first crowdfunding platform for equity investments to allow cross-border fundraising rounds across the EU. Seedrs has made over 2.5 years of historical data, on an anonymised basis, available to Vulkan and Åstebro for the project.”
“It’s a great honour to work with my former Oxford tutor, Nir Vulkan, along with Thomas Åstebro on this project,” Jeff Lynn, CEO and co-founder of Seedrs commented. “Equity crowdfunding is only in its infancy, and I expect their research to prove highly valuable for practitioners and observers alike as the space continues to grow rapidly in coming years.”
Earlier this year the Centre for Alternative Finance of University of Cambridge Judge Business School reported its comprehensive European Alternative Finance Benchmarking Survey study results in Moving Mainstream.