Reichenbach and Walther Financ Innov (2021) 7:54 https://doi.org/10.1186/s40854‑021‑00270‑0 Financial Innovation RESEARCH Open Access Signals in equity‑based crowdfunding and risk of failure Felix Reichenbach and Martin Walther* *Correspondence:
[email protected] Abstract Chair of Finance This study investigates signal validity in equity-based crowdfunding by examining and Investment, Technische Universität Berlin, Sec. H whether signals that increase crowd participation are associated with higher post- 64, Straße des 17. Juni 135, ofering success. Post-ofering success is measured as the probability of survival. We 10623 Berlin, Germany use a hand-collected data set of 88 campaigns with over 64,000 investments and 742 updates from a well-established and leading German equity-based crowdfunding platform, Companisto. We fnd that indicating that the chief executive ofcer holds a university degree and a higher number of business-related updates are associated with a lower risk of failure, which is in line with recent research on ofering success. The number of updates on external certifcation, promotions, and the team is associated with a higher risk of failure. In contrast to recent fndings on ofering success, we fnd that the equity share ofered is positively related to post-ofering success, whereas a high number of large investments or updates on campaign development are accom- panied by a higher probability of failure. Our results provide guidance for entrepre- neurs and investors regarding which signals are worth sending or using. Furthermore, these results suggest that investors are partly using wrong signals and challenge the rationality and wisdom of the crowd.