New sources of entrepreneurial finance

Small, young firms often face significant challenges in accessing external equity finance – the equity gap – to scale up and fuel their growth. The three papers of this PhD thesis investigate different aspects of new forms of entrepreneurial finance – equity crowdfunding (ECF) and angel platforms where firms raise funds digitally – in addressing this gap in both normal times and during the COVID-19 crisis. The first main paper (Chapter 2) analyses the gender structure of equity crowdfunding (ECF) initial campaigns on the Crowdcube platform and finds that female entrepreneurs are simultaneously less and more successful than their male counterparts. They are less successful in that they are underrepresented in ECF campaigns and that all female (Solo female and Female team) entrepreneurs run just one in seven (14.5%) successful ECF campaigns. However, the results also reveal that solo female entrepreneurs running ECF campaigns are more successful than their male counterparts in ECF outcomes. This signifies the democratizing role of equity crowdfunding in facilitating access to equity capital for female founders and reducing the gender bias documented in early-stage finance via traditional sources. However, it does not address the issue of the underrepresentation of female founders in ECF initial campaigns. The second paper (Chapter 3) examines the access of small firms to equity through ECF platforms during the COVID-19 pandemic. Contrary to expectations, initial equity crowdfunding (ECF) campaigns not only survived but thrived during COVID-19, demonstrating significant growth in funding volume, investor participation, and overfunding rates. This indicates a paradigm shift where external equity, traditionally funding of last resort, became the preferred option. This paper demonstrates that government-backed loan guarantees acted as a liquidity certification for ECF campaigns, particularly benefiting seed ventures, highlighting ECF's role as a digital lifeline. It also underscores the positive interaction between public support mechanisms and private equity, supporting the notion of a reverse pecking order where equity is the funding of choice. These findings emphasize ECF crucial role in providing equity capital to small firms during periods of economic uncertainty. The third main paper (Chapter 4) analyses the modus operandi of the Angels@Essex (A@E) platform as a locale-specific channel for investment by contributing to the advancement of the University Enterprise Zone (UEZ). Business angels are known as patient capital, serving as primary sources of seed capital and providing services that extend beyond financial measures. Angels@Essex, as part of the UEZ, has an additional motivation to support an innovative startup ecosystem. The results indicate that Angels@Essex has mainly invested in younger startups highlighting the positive impact of an angel platform within an UEZ. Moreover, although online digital platforms tend to mitigate geographical barriers, the majority of successful firms originate from Essex County. Finally, the analysis reveals a significant certification effect for prior funding from diverse financial sources including Innovate UK.