Recently a new type of institution has emerged, crowd funders. These entities: 1) channel capital to create intellectual property; 2) gather information on project and entrepreneur quality; and 3) gauge demand information directly from individuals to improve the efficiency of capital allocation. Data from crowd funder Kickstarter allows new insights on capital formation and the role of entrepreneurial reputation formation in the venture funding process. This funding method includes all cases where entrepreneurs try yet fail to raise funds, a feature heretofore unavailable to researchers. We find that both positive and negative reputation acquisition significantly change measures of capital raising success.

This paper examines whether the certification effect of VCs extends to firm's potential customers, and whether, by certifying firms' values to potential customers, VCs provide value to firms. Using weekly trading data from P2P lending platforms in China, we find that the amount of loans facilitated and the number of lenders increase significantly by 25.7% and 49.3%, respectively, immediately after announcements that P2P lending platforms obtain VC investment. We find that this certification effect increases with measures of VC reputation and measures of information asymmetry between P2P lending platforms and potential customers. A difference-in-differences analysis provides consistent results, which are robust after controlling for the effects of news, advertising, and funding. We also document that VC-backed platforms are less likely to default than non-VC-backed platforms. This result provides indirect evidence that VC backing has long-term benefits beyond the news and advertising effects.

We investigate the patterns and performance of banks’ investments in fintech ventures in the United States. We document that banks, as compared to independent venture capitalists (IVCs), invest a larger proportion in fintech startups and achieve a higher IPO exit rate. The better exit performance is neither explained by banks’ tendency to invest in later-round or larger deals, nor contributed by banks’ following successful peer IVCs. Banks’ outperformance is mainly concentrated in fin-native fintech startups and those whose business operations overlap with banks’ core business segments, which is consistent with the corporate venture capital (CVC) literature and the conjecture that banks possess unique industry expertise that facilitates their selection of fintech startups. In addition, banks participate more on the boards of fintech startups than of other ventures, implying that the better investment performance is not purely driven by selection.