--- title: "Syndication in Equity Crowdfunding: Performance and the Evaluation of Experts" authors: ["Christian Catalini", "Xiang Hui"] venue: "Research Policy" year: 2025 area: entrepreneurship featured: true links: pdf: "https://www.sciencedirect.com/science/article/pii/S0048733325001192" abstract: "Equity crowdfunding’s original premise was disintermediation, but equity contracts raise adverse selection and moral hazard. Studying online syndicates, the paper shows how professional leads investing alongside the crowd restore expert evaluation — and that the experts' assessments, not crowd enthusiasm, predict venture performance." --- Early crowdfunding platforms were based on a premise of complete disintermediation from experts: The crowd would directly fund projects based on the information shared online by the entrepreneurs, bypassing in the process traditional gatekeepers. This approach becomes **problematic when equity is involved**, since the degree of **asymmetric information** and the **risk of moral hazard**are higher than in reward-based crowdfunding. Platforms have therefore experimented with **market design solutions** targeted at counterbalancing these risks. In the paper, we study how online syndication by professional investors changed the allocation of capital on the leading US equity crowdfunding platform. Using novel data on investments and startup valuations, we find that**the introduction of intermediaries increased capital flows to non-hub regions by 25%,** a result that relies on syndicate leads having pre-existing professional ties in these areas. The early-stage deals closed through an intermediary in these new regions, moreover, tend to be associated with better returns, suggesting that **experts can play a key role in arbitraging opportunities and expanding access to capital across regions.** [Download the paper](https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2997710) *An earlier version circulated as “Can Capital Defy the Law of Gravity?” (working paper, 2017).*