Optimal multi-round portfolio crowdfunding financing and capital structure

This study investigates the start-up firm’s optimal decision in multi-round equity and debt portfolio crowdfunding financing and the design of risk-sharing mechanism. A crowdfunding platform serves as an intermediary between a start-up firm with limited initial capital and external investors seeking debt and equity investments. When the funding target is not met, the crowdfunding platform provides loans to bridge the start-up firm’s capital gap, which also gives chance to adjust its capital structure. Firstly, a decision-making model is established to derive optimal financing strategies for a startup firm and a crowdfunding platform, while also derived the financing ratio between equity and debt crowdfunding channels. A numerical analysis further examines how key parameters—such as fundraising rate and loan interest rate—affect the startup’s capital structure. More importantly, a novel debt-to-equity swap arrangement (DTE) is proposed for sharing debt risk between the start-up firm and the platform. The findings reveal that startup firms primarily rely on equity crowdfunding when the fundraising rate is moderate, while the low fundraising rate leads to a single equity crowdfunding approach. Similarly, the high loan interest rate drive startup firms to favor equity crowdfunding, whereas low rates may prompt platform to discontinue loans, leaving startup firms to rely solely on equity financing. Additionally, the DTE facilitates coordination among parties requires balanced adjustments from platforms (moderate commission rates), startup firm (capital structure optimization), and investors (appropriate success rates) to ensure effective risk-sharing and profit distribution.