This study explores the signaling value of equity crowdfunding compared to grants and business accelerators in attracting late-stage venture capital (VC) funding for start-ups. Using signaling theory and a probit regression model with propensity score matching, this study analyzes how equity crowdfunding functions as a signaling mechanism for start-ups. The study's findings reveal that although equity crowdfunding provides an initial signal of quality, start-ups relying on this mechanism are less likely to secure subsequent VC funding than those supported by grants or business accelerators. Notably, including human capital in equity crowdfunding ventures narrows the funding gap between crowdfunding and grants concerning VC funding probability, though the effect remains less pronounced than in business accelerator programs. This study enhances the understanding of crowdfunding's signaling efficacy and offers practical insights for researchers and entrepreneurs navigating the evolving landscape of start-up financing.
Ashfaq Ahmad (Wed,) studied this question.