Trusting the crowd: Effects of crowdfunding on venture capital syndicates

We assess whether and how crowdfunding influences follow-up financing through syndicated venture capital. Drawing on signaling theory and the syndication literature, our overarching empirical finding is that crowdfunding influences different dimensions of the venture capital syndication process. First, ventures that used crowdfunding have a lower likelihood to be financed by a syndicated investment. Second, a crowdfunding campaign facilitates smaller but more international syndicates, while investment experience appears to be incidental. Overall, our results show that a crowdfunding campaign can mitigate information asymmetries between a venture capitalist and a new venture, reducing the need to form syndicates.