Are Syndicates the Killer App of Equity Crowdfunding?
نویسنده
چکیده
Information asymmetry presents a challenge to equity crowdfunding just as in other markets for equity capital. Investors are less likely to finance startups when it is difficult to assess quality. We argue that syndicates reduce market failures caused by information asymmetry by shifting the focal investment activities of the crowd from startups to lead investors. Syndicates align incentives of issuers, lead and follow on investors by providing incentives for lead investors to conduct due diligence, monitor progress, and exploit their reputation. We report preliminary evidence that foreshadows a meaningful role for syndicates in the allocation of capital to early-stage ventures.
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