This study investigates the factors being associated with equity-crowdfunded companies'
likelihood of survival in the US. We focus on factors observable to crowdinvestors,
either being set by entrepreneurs (signals) or being non-alterable (determinants),
at least in the short run. Such observable factors at the time of crowdinvesting include
company and campaign characteristics, growth potential, and company riskiness. Cox
proportional hazards model is used on a sample of 429 US equity-crowdfunded companies.
We find that 89% of the companies survived for a minimum of three years after a successfully
funded initial equity offering. This survival rate is around ten percentage points
higher than in Europe. We document that equity retention, funding goal, and current
year revenue estimate are associated with the likelihood of building an enduring business.
Higher proportion of equity offered to crowdinvestors signals lower investment quality
and thus lower probability of survival. In contrast, companies with higher funding
target and current year revenue have better prospects for survival after a successful
equity offering. The funding goal affects the probability of survival through the
capital intensity channel; if a company in a capital intense industry has been successfully
funded, the threat from the competitors is lower given the high entry barriers.
