Sébastien Laurent : sebastien.laurent[at]univ-amu.fr
Christelle Lecourt : christelle.lecourt[at]univ-amu.fr
Equity crowdfunding is a new form of entrepreneurial finance, where investors do not receive perks or engage in a pre-purchase of the product, but participate in the future cash flows of a firm. In this paper, we analyze what determines individual investment decisions in this new activity. An important factor that may influence the behavior of investors is how the portal allocates securities. We use unique data from four German equity crowdfunding portals to examine how the allocation mechanism affects funding dynamics. In contrast with the crowdfunding campaigns on Kickstarter where the typical pattern of project support is U-shaped, we find equity crowdfunding dynamics to be L-shaped under a first-come, first-serve mechanism and U-shaped under second-price auction. The evidence further shows that investors base their decisions on information provided by the entrepreneur in form of updates during the campaign and by the investment behavior and comments of other crowd investors.