A Taxonomy of Equity Crowdfunding Startups in Brazil

Objective: this study addresses a gap in the literature by providing a taxonomy of startup profiles in the equity crowdfunding (ECF) market, analyzing their financial performance from an accounting perspective. Methods: using cluster analysis, t-SNE dimensionality reduction, cross-tabulations, and regression trees, we classified 37 equity offers from six platforms (2017-2020). The proposed taxonomy distinguishes two groups: operational performance, characterized by negative profitability but high fundraising values, and financial performance, marked by positive profitability but modest fundraising values. Results: we argue that startups’ financial goals, the amount raised in fundraising campaigns, the category of ventures, the type of business, and financial performance indicators are relevant KPIs for investors in the Brazilian ECF market. The taxonomy also identifies distinct entrepreneurial profiles, complementing the ex-ante analysis with an ex-post perspective. Conclusions: this approach offers a strategic tool for investors and managers to make informed decisions based on historical results, contributing to a refined understanding of the determinants of business success.