Oxford: Saïd Business School to study economics of equity crowdfunding

"Is there wisdom in the crowds?" asks Saïd Business School, University of Oxford.

The equity crowdfunding market is worth over £50 million a year in the UK, doubling in size last year as an increasing number of individuals look for an alternative place to invest their capital. Despite its size, however, there is very little research into market dynamics, the success of campaigns to attract funding, and the associated risks.

Nir Vulkan, associate professor of business economics at Saïd Business School, University of Oxford, has been granted funding from the Kauffman Foundation and Nesta to explore the business of equity crowdfunding. Working with Thomas Åstebro from HEC Paris, the 18-month project will explore the criteria for success for crowdfunders and how investors make decisions on what projects to back.

"We are looking to find out how investors react when presented with different information about an investment," said Vulkan. "Do they respond more strongly to information about the founding team, to company milestones, existing investors, or previous sales made?

"We will be able to understand what generates success and what leads to failure, and this will have important implications for companies looking for investment of money and community expertise.

"More broadly our findings will be of great importance for regulators and governments, both in the UK and internationally, looking at the benefits and risks associated with the crowdfunding sector."

The study is being conducted on Seedrs, one of Europe’s leading equity crowdfunding platforms. Seedrs matches investors with businesses seeking capital, conducts due diligence on the businesses, executes the investment transactions and acts as nominee on behalf of investors to protect their rights.

Seedrs was founded by Oxford MBA alumni Jeff Lynn and Carlos Silva, who worked on the idea for the company as part of their entrepreneurship project at Oxford Saïd, mentored by Vulkan, before it was launched in July 2012.

On average, over £2m is invested through Seedrs per month, and in 2013 it became the first crowdfunding platform for equity investments to allow cross-border fundraising rounds across the EU. Seedrs has made over 2.5 years of historical data, on an anonymised basis, available to Vulkan and Åstebro for the project.

Lynn, CEO and co-founder of Seedrs, said: "It’s a great honour to work with my former Oxford tutor, Nir Vulkan, along with Thomas Åstebro on this project. Equity crowdfunding is only in its infancy, and I expect their research to prove highly valuable for practitioners and observers alike as the space continues to grow rapidly in coming years."