Research On Early Exit Mechanism In Equity-based Crowdfunding

The rise of social networks and online platforms has not only increased the opportunities for start-ups to find initial investments,but also provided more investment channels for non-institutional investors.In the context of "Internet+",the crowdfunding initiators launch crowdfunding projects on the network platform to directly raise funds from the public,saving high intermediary costs and making internal capital flow more efficient.As a result,more and more entrepreneurs are using crowdfunding to fund their innovative projects.There are four types of crowdfunding,namely donation crowdfunding,return crowdfunding,equity crowdfunding and debt crowdfunding.The ways of crowdfunding have different characteristics according to the different ways of financing mechanism and income return.In particular,equity-based crowdfunding,as an emerging financing method for entrepreneurship,has gradually replaced the role of angel investment and venture capital in the field of entrepreneurship.Equity-based crowdfunding refers to a new financing mode in which fund raisers raise funds from the public through Internet platforms to support their entrepreneurial operations or projects.Compared with other forms of crowdfunding,the long duration of the project and the difficulty of the original fund withdrawal always limit the further development of equity-based crowdfunding.In order to raise more funds,some sponsors of equity-based crowdfunding projects set up an early exit mechanism to alleviate the difficulty of investors in withdrawing,allowing investors to actively choose to withdraw from the project at a certain point before the expiration of the investment cycle.There are many equity-based crowdfunding projects in China that have such an early exit node.It can be found that most projects with an investment cycle longer than 5 years will set an early exit node.With the shortening of investment cycle,there is a great difference in whether to set up early exit node.Therefore,as a new quality signal,it is of great significance to study whether the early exit mechanism can attract more investors and the types of equity-based crowdfunding projects suitable for the early exit mechanism.The research of this paper is mainly divided into two parts.The first part studies the influencing factors of the early exit mechanism in the financing stage,and analyzes the prerequisite conditions for entrepreneurs to set up the early exit mechanism by establishing a mathematical model.The results show that the project with high initial investment cost and long return cycle is suitable to design the early exit mechanism to play the role of price discrimination and raise more funds,while the project design early exit mechanism that can produce high returns in a short period of time cannot raise more funds.From the perspective of entrepreneurs,the early exit mechanism differentiates and makes use of investors of different utility types,playing a role of price discrimination.But whether or not to design an early exit mechanism also depends on the specific type of project In addition,the investment risk and return rate of the project at different stages,the target valuation before the project launch,group effect and other factors also have a positive impact on the financing performance.The second part,based on the results of theoretical analysis,examines the impact of early exit mechanism on project financing performance from the perspective of empirical analysis.This paper uses the propensity score matching method to make an empirical analysis of the project data of the equity-based crowdfunding platform"Kaishiba".Conclusion:the early exit mechanism has a significant effect on the financing amount,which is related to the investment cycle.With a short investment cycle,projects without early exit nodes can raise more funds.When the investment cycle is long,almost all projects have an early exit node,which has a substitution effect on the investment cycle.As there are few researches on the early exit mechanism in the field of equity-based crowdfunding,this paper,on the one hand,improves the academic research on equity-based crowdfunding,and on the other hand,provides theoretical guidance and reference for entrepreneurs to maximize the fund raising by using the early exit mechanism when conducting equity-based crowdfunding.