New Technology Assessment in Entrepreneurial Financing - Can Crowdfunding Predict Venture Capital Investments?

Abstract: Recent years have seen an upsurge of novel sources of new venture financing through crowdfunding (CF). We draw on 54,943 successfully crowdfunded projects and 3,313 venture capital (VC) investments throughout the period 04/2012-06/2015 to investigate, on the aggregate level, how crowdfunding is related to a more traditional source of entrepreneurial finance, venture capital. Granger causality tests support the view that VC investments follow crowdfunding investments. Cointegration tests also suggest a long-run relationship between crowdfunding and VC investments, while impulse response functions (IRF) indicate a positive effect running from CF to VC within two to six months. Crowdfunding seems to help VC investors in assessing future trends rather than crowding them out of the market.