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Senior Alex Schlosser's research looks at the dynamics of equity crowdfunding in the United States

Monday, April 27 2020 09:56am

This HTC business student's findings offer entrepreneurs insights into the kinds of signals that can lead to crowdfunding success.

Over the past few years, #BusinessBobcat Alex Schlosser (business analytics and finance double major) has been working toward his thesis topic* focused on crowdfunding research.

Schlosser commented that equity crowdfunding is a new and exciting place in the entrepreneurial finance landscape, with a lot of exploration and theorizing to be done. He added, “It’s also small in comparison to legacy forms of venture financing and underutilized, in my opinion.”

An inherent interest in crowdfunding and a desire to contribute to this academic field led Schlosser deeper into the topic. He wanted to shed light on how entrepreneurs can be successful on an equity crowdfunding platform — and help bring awareness to the usefulness of this tool from a practical perspective.

Asked about his research, Schlosser said:

“My research looks at one-way new businesses can raise money from investors. Prior to 2016, only wealth investors could invest in stock of private companies. Equity crowdfunding allows nearly everyone to invest small amounts of money to several young businesses including tech startups, local breweries, or a small coffee bean farm. With so many investors, who may have different motivations to invest, the path to success on an equity crowdfunding platform may vary greatly from other ways new businesses can raise money — by taking on debt, seeking venture capital, or wooing angel investors. So, this research looks at how entrepreneurs can successfully raise money using equity crowdfunding. “

Alex Enactus

Provided photo: Alex Schlosser [front row] with group members at an Enactus event

The College of Business’ Associate Professor of Strategy, Entrepreneurship & International Business Ikenna (Ike) Uzuegbunam, Ph.D. has worked closely with Schlosser over the past four semesters. When asked about Schlosser’s research, Uzuegbunam explained that it is worth noting that his work is generating new insights into a fundamental question in entrepreneurship research — how entrepreneurs access funding for their new ventures.

“Though researchers have been interested in this topic for decades, Alex's contributions are rather unique because they pertain to a relatively novel and understudied part of entrepreneurial finance — equity crowdfunding,” Uzuegbunam explained. According to Uzuegbunam, Schlosser’s research is among the first to study the dynamics of equity crowdfunding in the United States.

“Indeed, I believe his study is the first empirical study of the US-based equity crowdfunding platform Wefunder.com. This suggests that Alex's findings have the potential to impact our understanding of equity crowdfunding in the United States from a theoretical and practical perspective,” Uzuegbunam said.

Uzuegbunam went on to explain that Alex’s outlook enlightens entrepreneurs on the potential strategic tradeoffs in equity crowdfunding.

“Alex ‘s study offers a more eclectic view of crowdfunding success. He moves beyond typical concepts of success such as amount of funding raised by entrepreneurs to consider concepts related to the average amount of funding raised from each crowdfunding investor.”

Perhaps it’s no surprise that Uzuegbunam also mentioned that Alex's work is unique from a methodology perspective. He shared that Alex draws on a novel set of empirical methods and variables in his work. “For instance, he uses Python, a text mining tool to decipher new venture CEO's messaging to potential investors in the crowdfunding platform.”

Recently, Schlosser took to Instagram. And it wasn’t just to share a new selfie or throwback pic: it was to share some of his research.

On April 9, Ohio University hosted its Student Expo, an annual event to celebrate and showcase Ohio University student research and creative activity! This year, because in-person campus events were canceled, the event morphed into #OUVirtualExpo and students posted their work to their Twitter and/or Instagram account. This gave Schlosser a new opportunity to share his crowdfunding research.

Schlosser’s Instagram post/#OUVirtualExpo entry is included below

Uzuegbunam notes that Schlosser’s findings offer entrepreneurs insights into the kinds of signals that can lead to crowdfunding success. “Alex has been rigorous in documenting the methodology in his thesis and the associated appendices in a manner that would be helpful for future research.”

Schlosser’s research and participation in the #OUVirtualExpo certainly added a few feathers to his cap. And there’s already more to celebrate: Schlosser graduates in May 2020 and will be an equity research associate covering the leisure industry with KeyBanc Capital Markets.

Schlosser’s Instagram post:

Although crowdfunding in the U.S. dates as far back as financing for the Statue of Liberty 🗽, unaccredited investors (those with < $1M in net worth or < $200k in annual salary) could not take an ownership stake in a private company until Regulation CF (part of @barackobama administration’s JOBS Act) was implemented in 2016. Since then investors and entrepreneurs have been drawn to sites like @wefunder to democratize startup funding 💸. The U.S. equity crowdfunding market is relatively young compared to other forms of venture financing (Angel Investment, Venture Capital, etc). For example, venture capitalists invested ~$136.5B in 2019, but the U.S. equity crowdfunding market only generated ~$121.3M for startups. Clearly, we still have a LOT to learn about this area of entrepreneurial financing.

With the guidance of @ohioubusiness and @honorstutorialcollege , I conducted an empirical study on how entrepreneurs can become successful in raising equity crowdfunding. My study draws on a novel dataset derived from @wefunder. Unaccredited equity crowdfunding has the potential to structurally change many characteristics of the venture financing market. For example, technology and information companies raise >40% of U.S. venture capital. With equity crowdfunding, not only do information-tech companies raise < 30% of total capital, but ALCOHOL-related 🍺🍷companies (breweries, wineries, etc.) draw ~25% of funding. Swipe to see some initial findings of the study📊📈 #OUVirtualExpo @ohio.university @ohio_ce @ohiostudentexpo @bobcatsdiscover

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*Alex is part of OHIO’s Honors Tutorial College where undergraduate students write a thesis as part of the curriculum and graduation requirements. While an HTC student pursuing a Bachelor of Business Administration (business analytics and finance double major) alongside College of Business peers, Schlosser was an active member in the Ohio University Student Equity Management Group, was recognized with the Impact Award and Student of the Year Award from the Analytics and Information Systems Department (home of OHIO’s MIS and Business Analytics majors), was an applied investment management intern with Ohio University, an enterprise commercial payments intern with Keybank, and an equity research intern with KeyBanc Capital Markets.