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Equity crowdfunding: a new model for financing entrepreneurship

Crowdfunding_140pResearchers from LSE’s Centre for Economic Performance (CEP) have demonstrated the benefits of equity crowdfunding as a “robust alternative” for investors and entrepreneurs.

CEP has analysed investment behaviour on the UK’s largest equity crowdfunding platform, Crowdcube, a market leader in its field, nearly tripling between 2014 and 2015.

According to CEP’s researchers writing in the latest issue of Centrepiece, its departmental magazine, crowdfunding “serves as a robust source of alternative entrepreneurial finance which has operated in a stable and predictable manner” in its infancy.

Saul Estrin62x86“The findings suggest that this new virtual market can solve the persistent market failures in funding entrepreneurial ventures, according to Professor Saul Estrin (left) and Dr Susanna Khavul (right) from CEP.

Susanna Khavul_62x86“What’s more, this financial innovation reduces the biases in traditional forms of early stage entrepreneurial finance – such as the sector or location of the business or the entrepreneur’s gender,” researchers say.

“By moving from the physical space to the digital space, equity crowdfunding engages larger networks of entrepreneurs, offering entry points across populations and locations. In the process, it may also help to socialise entrepreneurial finance.”

Notes for editors:

Equity Crowdfunding: a new model for financing entrepreneurship? by Saul Estrin and Susanna Khavul is an article in the latest issue of CentrePiece* – the tri-yearly magazine published by the Centre for Economic Performance** at the London School of Economics and Political Science.

To cite the article, please use: Estrin, S. Khavul, S. (2016). Equity Crowdfunding: A new model for financing entrepreneurship? Centre Piece 20(3) p.6-9.

Saul Estrin is professor of managerial economics and strategy at LSE, the founding head of LSE’s Department of Management, and a research associate in the Centre for Economic Performance’s growth programme. Susanna Khavul is a Leverhulme visiting professor at LSE, a Centre for Economic Performance research associate and is with the Entrepreneurship and Innovation Faculty at the University of Texas at Arlington.

For further information, contact:

Saul Estrin, email: s.estrin@lse.ac.uk or Susanna Khavul, email: s.khavul@lse.ac.uk.

*CentrePiece Volume 20, Issue 3, Winter 2015/16 will be published on Monday 22 February 2016.

**The Centre for Economic Performance (CEP) is an independent ESRC funded research centre based at the London School of Economics and Political Science. Its members are from the LSE and a wide range of universities within the UK and around the world.

18 February 2016