The effect of lead investors’ trustworthiness on funding performance: The moderating effect of investment-specific human capital

Crowdfunding provides many opportunities for the development of society by supporting entrepreneurial and innovative activities. This article concerns equity crowdfunding syndicates; innovative entrepreneurial financing that introduces professional lead investors to online platforms. Equity crowdfunding syndicates facilitate crowdfunding by mitigating the information asymmetry between crowd investors and entrepreneurs. Based on a multidimensional view of trustworthiness, we investigate the effects of lead investors’ integrity, ability, and benevolence on their funding performance. Focusing our analysis on data from a sample of 179 lead investors on AngelList, a world-leading equity crowdfunding platform in the U.S., we find that lead investors’ integrity and ability are, as predicted, positively associated with their funding performance. However, we do not find a significant effect from benevolence. The results also show that the investment-specific human capital of lead investors moderates the effect of integrity on their funding performance. Our study contributes to the crowdfunding literature by providing insights into the multidimensional trustworthiness of a capital provider in determining funding performance. It also contributes to the under-researched area of technological innovation since a crowdfunding syndicate is an alternative means of financing for entrepreneurs.