Speaker 1: Hello, I'm Nir Volkan, I'm an economics professor at the Said Business School here in Oxford. The research I'm going to talk about today is joint work with Professor Tom Astebro from HSE Paris and Manuel Fernandez who is a PhD student in economics department here in Oxford. paper is on equity crowdfunding and this is something that we are very interested in and it's part of a big project that I'll tell you a little bit about. Both Tom Astenborough and I are interested in entrepreneurship and have worked for the last few years on entrepreneurship and I'm also in part of the finance group so equity crowdfunding falls naturally into the kind of things I'm interested in. More so, even more important, is that this company CEDARS that we're working with was started by two of my former students, two MBA students here in Oxford, Jeff Lin and Carlos Silva, and in fact I supervised that project when they first started and that project became CEDARS. CEDARS is an equity crowdfunding company. Equity crowdfunding is a little bit different than reward-based crowdfunding, which is what most people have heard of, things like Kickstarter, where you put some money and you get the product when it's ready, or you get a t-shirt, or you just get a thank you from the people who are starting it. Equity crowdfunding is different. It's proper investing in the sense that the company is asking, let's say, for £100,000 in return for 20% equity in the company. puts in 10 pounds, 15 pounds, and so on. The crowds put that. If enough money is raised, i.e. if at least 100,000 is raised, then CIDRs, on behalf of all these small investors, make an investment in the company and get an equity stake. So in that sense, it's much more like VC funding, which, again, is something we here in the Said Business School are very interested in, and many of my colleagues have worked on this. So this is the background. This is how we got into it. And it was easy to convince Jeff and Carlos, our students, to give us the data. And the data is wonderful. One of the nice things about having this web-based things is everything is recorded. And so we can see minute by minute how investors behave. What do they respond to? What kind of things in the campaign? So a campaign takes 60 days. In Cedars, it's fixed. It's only 60 days. During those 60 days, minute by minute, things happen. Investments or pledges are made to a campaign. We can see if and how people respond to that. Now, obviously, the data is anonymous, but we know where these people are located. So we can see whether equity crowdfunding helps investments from, let's say, outside London? Does it sort of empower people from the suburbs, from smaller parts of the country? And not just the UK. It's a see the stakes from investments from all over Europe. We can see, we can look at things like gender type questions, if more women or men invest in companies and so on. And so there's a very, very rich data set, which is wonderful. It also means a lot of work. So it's probably a beginning of a long-term project that we do. The paper in the JBV Insights, this is the first paper we wrote. And it really contains descriptive statistics of the first four years of equity crowdfunding. Now, I should say equity crowdfunding really only happened, or only significantly happened, in the UK. And this is because the UK regulator allowed for this to happen. Because you can imagine this is taking money from little old ladies to invest in very risky companies, potentially risky companies. A lot of these companies will fail. And so many other countries, like the US, until recently didn't allow for this to happen. So the UK did allow for this to happen, with certain conditions, of course. And so most of the action has happened here. Also in the UK, the government, in fact, encourages people to invest in start-ups, only in UK-based start-ups, through very generous tax incentives. And so that also created this big boom. So Cedars is one of the two leading companies, the two leading equity crowdfunding companies in the UK, but in fact in the world. And so we looked at the data from the first nearly four years of work of this company, all the campaigns, and the results are summarised in the paper. And what we also did, the other thing we did in the paper is we compared that to data collected from Kickstarter, so from non-equity or reward-based crowdfunding, and in particular from a paper in the JBV that looks at that. And so we see a number of things. First, we should mention in terms of total investment that this is much bigger. The average investment is big, and it's in the 100,000s, the campaign size, and it's growing. This is clearly there is some kind of niche. There's a gap in the market where entrepreneurs, It may be easy to get 10,000 pounds from friends and family, or maybe not that easy. But it's very difficult to raise 100,000, because the VCs only want to or are only interested if it's over a million and there's some revenue. And so what CDoS did is they really nicely identified this niche. And so you get a lot of campaigns where people are asking for 100, 200, 300,000 pounds or so. And that's much, much larger than, say, Kickstarter, where people are asking for $10,000 or $15,000. So what we see with the CDIS data, and that is similar to what has been observed in Kickstarter and other reward-based crowdfunding, is this herding behavior. The fact that a campaign, it's very early in the campaign. In the first few days, you can tell if it's going to be successful or not. And campaigns who don't start will really, really struggle. There's some exceptions, but largely that's how it behaves. This is something we're very interested in, Because you can imagine that being both a good thing, in the sense that people learn from the behavior of others. And there's nothing wrong with that. In fact, if lots of people like this and think it's going to succeed, then probably there's a better chance it's going to succeed. But also, we're a little bit worried that people are a bit more like Lemmings and just do what the crowd is saying. And maybe if everybody's going to invest maybe in a company that looks good but may not succeed, that may not necessarily be the best thing. So we're trying to get a little bit deeper in the subsequent research we're doing, we're trying to get a little bit deeper into that by developing chronometric models, by digging deeper into the data that we have to look at the behaviour of the investors. I should say that we are engaged in an A-B type experiment with CDERs where some investors would see a slightly different landing page. Landing page is the first page you see which tells you about the campaign and of course all the information is there and correct so nobody is being in any way manipulated but just presenting the thing that tries to attract you to look at the project we manipulate some of the things we show and we want and that will allow us really to prove as much as you can prove what causes people to invest in a project and so on. So that's what we are, sorry that's where we are, that's what we have found, there's much more detail in the paper. The implication of these are clearly important, as they're important to entrepreneurs of course, who want to understand how to get funded. They are very important for investors who want to be careful and to think how best to invest their money, but I think mostly for regulators and venture capitals, so the practitioners of the entrepreneurial finance space, I think these are the people who are really affected by it and I think the conclusion from this is there is a gap and therefore these things are good, they are here to stay, they provide a solution for missing a step in the entrepreneurial finance space and therefore that's a good thing. Obviously regulators need to think carefully about that, but it could be a force for good, It could, as I said, allow people from remote parts to access capital markets, to get funding for their project. It can allow people to, with teams that are less experienced, to really have equal access to the crowds and let the crowd decide whether to fund it or not. So thank you. You