Signals to Captivate: The Impact of Signals in US and UK Equity Crowdfunding Project Success

When traditional financial institutions found it challenging to help small- and medium-sized enterprises (SMEs) with capital allocations, crowdfunding emerged as a beacon of innovation by furnishing and supporting the operations of SMEs by financing their tasks and facilitating the risk-sharing process. Alongside its significant expansion and widespread appeal, crowdfunding encounters several critical challenges, one of the most prominent being the information asymmetry that may arise between those seeking funds and prospective supporters. Grounded in the principles of signalling theory, a theoretical framework has been constructed for a comparative analysis between the United States and the United Kingdom. The study's objective is to investigate information manipulation in an equity crowdfunding market by adopting visual cues (images, video, share price, valuation, equity offered) to mitigate the problem of information asymmetry in making the project successful. This has been achieved by compiling secondary data from the following equity-based platforms: StartEngine (US platform) and Seedrs and Crowdcube (UK platform). We employed econometric techniques and quadratic analysis and validated the models through a robustness check. Results reveal that the visual cues substantially impact a project's success by mitigating the problem of information asymmetry, but this varies in each country. These findings provide valuable insights for entrepreneurs, investors and policymakers regarding how different signals in distinct market environments drive crowdfunding performance. The study fills a significant lacuna in the existing literature and provides practical guidelines on optimizing crowdfunding strategies for better outcomes in both regions.