In 2019, equity crowdfunding (ECF) in Europe accounted for almost 6% of early-stage capital investment — around €780 million. The global crowdfunding market, which also includes rewards-based funding and donations, is projected to reach almost US$ 28 billion by 2027.

Yet while ECF may seem an attractive prospect for start-ups, new research suggests that those who choose this route are more likely to fail than those who receive investment from more traditional, established funding sources.

Analyses by Esade’s Daniel Blaseg and co-authors Douglas Cumming and Michael Koetter, which appeared in Entrepreneurship Theory and Practice, suggest that ventures of lower quality are more likely to use ECF to raise external finance — with important implications for investors.

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