Equity Crowdfunding as a Source of Finance for Early-Stage Cleantech Firms: Exploring the role of patents

Abstract

This study investigates whether European Cleantech firms with patents attract more equity crowdfunding than those without patents. We find that firms with patents indeed raise significantly more funding in crowdfunding campaigns. We also find, inter alia, that two measures of innovation  —firms’ intangible asset values and the number of patents pending—  increase after a successful (in terms of amount raised) crowdfunding campaign. Firms with patents granted have more debt finance than firms with patents pending. A key determinant of the amount of crowdfunding raised is the number of patents pending, suggesting that equity investors are keen to invest on the promise of success. We also find that debt finance has a significant impact on the development of intangible assets, which indicates the role of capitalized intangible assets and patents to secure debt. Our findings suggest support for signaling theory, as patents reduce information asymmetries and act as a signal for equity crowdfunding investors.