Are Syndicates the Killer App of Equity Crowdfunding? Harvard Case Solution & Analysis

Advice asymmetry presents a challenge to equity crowdfunding just as in other markets for equity capital. Investors are much less likely when it is hard to assess quality to fund startups. Syndicates reduce by shifting the focal investment activities of the group from startups to lead investors, market failures due to information asymmetry.

Syndicates align the incentives of issuers, lead investors, and follow on investors by giving incentives for lead investors to conduct due diligence, monitor progress, and use their standing. Preliminary evidence foreshadows a significant role for syndicates in the allocation of capital to early-stage ventures.

PUBLICATION DATE: February 19, 2016 PRODUCT #: CMR616-HCB-ENG

This is just an excerpt. This case is about INNOVATION & ENTREPRENEURSHIP

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