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Abstract

We use hand-collected data of 20,460 investment decisions and two distinct portals to analyze whether investors in equity crowdfunding direct their investments and portfolios to local firms. The results suggest that investors exhibit a local bias, even when controlling for family and friends. In addition to the regular crowd, our sample includes angel investors who invest considerable amounts and exhibit a larger local bias. By contrast, well-diversified investors are less likely to suffer from this behavioral anomaly. The data further show that portal design is important for attracting investors more prone to having a local bias. Finally, firms engaging in equity crowdfunding overcome funding barriers by attracting investors at all distances. These findings corroborate regulation targeted to specific investor groups, advise managers of equity crowdfunding portals about their business model, and inform individual investors of their biases.