Are Syndicates the Killer App of Equity Crowdfunding?

Author:

Agrawal Ajay,Catalini Christian,Goldfarb Avi

Publisher

Elsevier BV

Reference14 articles.

1. $ Policymakers$ are$ already$ acutely$ aware$ of$ the$ importance$ of$ local$ entrepreneurship;$ interventions$ abound$ to$ stimulate$ the$ birth$ and$ development$ of$ startups.$ However,$ the$ rise$ of$ syndicates$ puts$ increasing$ emphasis$ on$ the$ role$ of$ angel$ investors.$ Not$ only$ are$ high@performance$ angels$important$for$allocating$early@stage$capital,$but$in$a$world$of$syndicates,$high@quality$angels$are$ critical$ for$ attracting$ capital$ from$ outside$ the$ region.$ The$ capital$ pool$ associated$ with$ investors$ who$ back$a$local$lead$investor$is$made$even$more$valuable$by$the$accompanying$social$networks$that$expand$ the$reach$of$funded$ventures$through$backers'$relationships$with$potential$customers,$recruits,$partners,$ and$follow@on$investors;Syndicates$ provide$ policymakers$ an$ opportunity$ to$ take$ actions$ that$ influence$ capital$ flows$ into$ their$ jurisdiction

2. $At$present,$it$is$less$obvious$whether$investors$from$outside$the$ US$ can$ lead$ investment$ rounds$ for$ ventures$ inside$ the$ US$ or$ within$ their$ own$ countries$ and$ attract$ backers$ from$ both$ inside$ and$ outside$ the$ US$ using$ AngelList$ or$ similar$ platforms;While$ most$ policy$ points$ in$ articles$ on$ crowdfunding$ are$ focused$ on$ existing$ or$ anticipated$ securities$ regulations$ administered$ by$ the$ United$ States$ Securities$ and$ Exchange$ Commission$ (SEC),2013

3. $it$is$not$too$early$to$observe$that$syndicates$have$economic$properties$that$lend$themselves$ to$ significantly$ reducing$ the$ information$ asymmetry$ problem.$ In$ other$ words,$ the$ economics$ of$ information$ associated$ with$ early@stage$ investing$ are$ much$ better$ suited$ to$ crowdfunding$ angels$ than$ crowdfunding$ ventures.$ This$ is$ not$ only$ true$ in$ theory$ but$ also$ evident$ in$ the$ data$ on$ AngelList$ investment$activity.$Syndicates$amplify$the$impact$of$high@performing$angel$investors$by$providing$them$ with$a$more$explicit$reputation$and$online$tools,$both$of$which$can$be$leveraged$to$attract$capital$from$a$ global$rather$than$local$community$of$investors;It$ is$ too$ early$ to$ state$ with$ certainty$ that$ syndicates$ are$ the$ "killer$ app"$ of$ equity$ crowdfunding.$ However

4. Communicating with Your Investors or “Backers”

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