Dynamics of investor communication in equity crowdfunding

Abstract

In crowdfunding, start-ups can voluntarily communicate with their investors by posting updates. We investigate whether start-ups strategically use updates, which have previously been shown to increase investments. To this end, we use hand-collected data from 751 updates and 39,036 investment decisions from two major German equity crowdfunding portals: Seedmatch and Companisto. We find evidence of strategic communication behavior of start-ups during an equity crowdfunding campaign. During the funding period, start-ups more frequently post updates with linguistic devices that enhance the group identity and the group cohesion as well as updates on the business development. Furthermore, the probability of an update during the funding period increases along with strong competition of other contemporary crowdfunding campaigns.