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Considering the unique characteristics of equity crowdfunding platforms including the removal of stringent structural barriers (e.g. lack of co-location), high visibility and traceability of investor characteristics, large pool of available investors and simplified transaction process, the authors aim to examine how the two most prevalent mechanisms (i.e. homophily and repeated ties) unfold in this context by incorporating the contextual characteristics. The authors theorize an inverted U-shaped relationship between leader-backer similarity and the likelihood of co-investment in a syndicate on equity crowdfunding platforms. In addition, a leader–backer dyad is more likely to form new syndicates if the students have more prior co-investment ties.

The empirical study is based on data from the AngelList syndicate platform and a linear probability model (LPM) with fixed effects is adopted to estimate the syndicate formation.

The authors find that the similarity between a leader and a backer has an inverted U-shaped relationship with the leader and backer's likelihood of co-investment in a syndicate, which is different from the dominant homophily-based tie formation in venture capital (VC) syndicates and other digital platform contexts. Although equity crowdfunding platforms encourage the possibility of exploring new partners, investors are more likely to co-invest with others who have stronger prior ties.

This research theoretically contributes to the scant literature of equity crowdfunding syndicates by contextualizing two most prevalent mechanisms (i.e. homophily and repeated ties) driving tie formation in VC syndicates and digital platforms.