An Exploratory Analysis of Title II Crowdfunding Success

Abstract

The passage of the Jumpstart Our Business Startups Act (JOBS Act) ushered in a new wave of equity crowdfunding in the United States. Title II of the JOBS Act aims to make it easier for new ventures to raise funds from accredited investors. The number of Title II crowdfunded projects is growing rapidly. Based on data for U.S. online 506(c) offerings across 17 leading platforms, more than $1.27 billion in capital was committed to Title II projects through 2015. Our analysis of Title II offerings from these platforms reveals that real estate ventures are the single largest category with more than $316 million in committed capital, yet only ~34% of the crowdfunded real estate offerings receive the full amount of capital sought. Text mining of the real estate project descriptions reveals the critical facilitation role played by the successful crowdfunding platforms in reducing the information asymmetry between the entrepreneurs and investors by performing due diligence on the potential Title II investment opportunities.