Crowd-based feedback and early-stage entrepreneurial performance: Evidence from a digital platform |
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| Institution: | 1. Antai College of Economics and Management, Shanghai Jiao Tong University, People''s Republic of China;2. Warwick Business School, University of Warwick, United Kingdom of Great Britain and Northern Ireland;3. School of Management, Fudan University, People''s Republic of China;4. School of Computing, National University of Singapore, Republic of Singapore;1. Federal Reserve Bank of Philadelphia, United States of America;2. Harvard Business School and NBER, United States of America;3. Harvard University, United States of America;4. Yale University, United States of America;1. Bern University of Applied Sciences, Switzerland;2. University of Zurich, Switzerland;3. ZEW Mannheim, Germany;4. Audencia Business School, France;5. Aalto University School of Business, Finland;1. Central Bank of Uruguay, Diagonal Fabini 777, 11100 Montevideo, Uruguay;2. University of the Republic, School of Economics and Administration, Institute of Economics, Gonzalo Ramírez 1926, 11200 Montevideo, Uruguay |
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| Abstract: | The ability to identify early-stage venture potential, which has traditionally relied on experts, is challenging because new ideas are uncertain. However, judgment from a large number of evaluators can effectively identify promising ventures. This paper empirically studies whether crowd-based information generates informative feedback for entrepreneurs and seed investors. Using data on 701 early-stage founders of new ventures examined by 2600 evaluators, I estimated the effects of crowd-based ratings on survival and securing seed funds. I find that the crowd rating was uncorrelated with subsequent financing events from seed investors but increased a venture's probability of continuation by 3.1 percentage points. This effect became stronger as the number of evaluators increased. This finding highlights that a judgment aggregation offers information for nascent venture founders. |
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