Are Syndicates the Killer App of Equity Crowdfunding?
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Agrawal-2016-Are syndicates the k.pdf
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318.91 KB
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Author(s)
Agrawal, Ajay
Catalini, Christian
Goldfarb, Avi
Date Issued
January 2016
Journal
California Management Review
Publisher
University of California Press
Citation
Ajay Agrawal, Ajay, Christian Catalini, and Avi Goldfarb. "Are Syndicates the Killer App of Equity Crowdfunding?." California Management Review (Winter 2016) 58:2, pp.111-124.
Version
Final published version
Abstract
Information asymmetry presents a challenge to equity crowdfunding just as in other markets for equity capital. Investors are less likely to finance startups when it is difficult to assess quality. Syndicates reduce market failures caused by information asymmetry by shifting the focal investment activities of the crowd from startups to lead investors. Syndicates align the incentives of issuers, lead investors, and follow-on investors by providing incentives for lead investors to conduct due diligence, monitor progress, and exploit their reputation. Preliminary evidence foreshadows a meaningful role for syndicates in the allocation of capital to early-stage ventures.
MIT Department
Sloan School of Management
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Article is made available in accordance with the publisher's policy and may be subject to US copyright law. Please refer to the publisher's site for terms of use.
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DOI of Published Version
https://doi.org/10.1525/cmr.2016.58.2.111
