Pricing shares in equity crowdfunding

We analyze the pricing of cash flow rights in start-up companies using a unique data set of 44 equity crowdfunding campaigns. Our sample consists of 499 backers who invested during the period from November 6, 2011, to March 25, 2014, on the German equity crowdfunding portal Innovestment. In contrast with all other European equity crowdfunding portals, Innovestment runs a multi-unit second-price auction in which backers themselves can specify the price of an investment ticket. We exploit this unique auction mechanism to analyze backers' willingness to pay for cash flow rights. We find that campaign characteristics, investor sophistication, progress in funding, herding, and stock market volatility influence backers' willingness to pay in an economically meaningful manner, while geographic distance, learning effects, and sniping at the end of an auction have no effect.