Crowd-based feedback and early-stage entrepreneurial performance: Evidence from a digital platform

The ability to identify early-stage venture potential, which has traditionally relied on experts, is challenging because new ideas are uncertain. However, judgment from a large number of evaluators can effectively identify promising ventures. This paper empirically studies whether crowd-based information generates informative feedback for entrepreneurs and seed investors. Using data on 701 early-stage founders of new ventures examined by 2600 evaluators, I estimated the effects of crowd-based ratings on survival and securing seed funds. I find that the crowd rating was uncorrelated with subsequent financing events from seed investors but increased a venture's probability of continuation by 3.1 percentage points. This effect became stronger as the number of evaluators increased. This finding highlights that a judgment aggregation offers information for nascent venture founders.