SHOULD CROWDFUNDING INVESTORS RELY ON LISTS OF THE BEST PRIVATE COMPANIES?

The objective in this research is to consider whether firms funded via venture capital and identified as "best" are indeed good investments for individual investors and whether individual investors should be interested in investing in private venture-backed firms. The results indicate that...

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Bibliographic Details
Published inCorporate finance review Vol. 19; no. 6; p. 4
Main Authors Jensen, Marlin R H, Marshall, Beverly B, Jahera, John S
Format Journal Article
LanguageEnglish
Published New York Thomson Reuters (Tax & Accounting) Inc 01.05.2015
Subjects
Closely held corporations
Crowdfunding
Efficient markets
Entrepreneurial finance
Entrepreneurs
Going public
Initial public offerings
Investment policy
Investments
JOBS Act-2012
Ratings & rankings
Stock exchanges
Studies
Success
Venture capital
Venture capital companies
United States > US
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Summary:The objective in this research is to consider whether firms funded via venture capital and identified as "best" are indeed good investments for individual investors and whether individual investors should be interested in investing in private venture-backed firms. The results indicate that individual investors who invested in venture-capital-backed firms after they went public did not get as good of a return as simply investing in the S&P 500 index. Examining both the venture-capital-backed firms that went through the process of being acquired and prior to going public showed that venture capitalists can make returns greater than an investment in the S&P 500 index. Meanwhile, individual investors through the JOBS Act will eventually have the right to buy common shares from private companies. Furthermore, using The Wall Street Journal ranking of private firms, this study finds that individual investors would have done better buying private shares than waiting for the private companies to go public.
ISSN:1089-327X