Investment Crowdfunding Q2 2023 Roundup – Promising Growth and Shifts in Alternative Finance Landscape

Welcome to the Q2 edition of our Investment Crowdfunding Newsletter! In this month’s issue, we delve into the ongoing debate among experts about the possibility of a recession in the United States and its potential impact on equity crowdfunding. Despite concerns surrounding higher borrowing costs and interest rate hikes, the economy has shown resilience, with consumers continuing to spend and employers maintaining robust hiring trends. As we explore the results of Q2’s investment crowdfunding campaigns, we’ll analyze how these economic factors have influenced the landscape and contributed to the success stories within the crowdfunding realm.

According to a comprehensive analysis of offers, investments, and checks written data, Q2 2023 exhibited steady growth, albeit with a slight decrease in new deals compared to the previous quarter. The number of new deals stood at 355, indicating a consistent rise in opportunities. Total commitments from investments amounted to $151.7 million, with an impressive count of 99,388 investors.

Sherwood Neiss, Principal at CCA. said, “As we analyze the quarterly findings, we witness a resilient market showing steady growth in Q2 2023. While there may have been a slight dip in deal flow compared to the previous quarter, it is important to acknowledge the overall upward trend in offers, investments, and checks written. These findings reflect the ongoing strength and potential of the market, underpinning the positive outlook for investors and entrepreneurs alike.”

 

Issuers/Deals

  • In Q2, a remarkable 403 deals were closed, marking the second-highest number since the industry’s inception.
  • The number of new issuers declined compared to the previous quarter and year, yet still ranked as the 10th best quarter.
  • 3 out of 4 deals successfully met their minimum funding targets, a slight improvement from the previous quarter.
  • The average time on the market was 43 days, indicating favorable market dynamics.
  • The total number of deals surpassed 7,200, showcasing robust deal flow and sustained interest.
  • Post-revenue companies coming online outpaced pre-revenue ones at a ratio of 1.64 to 1, with significantly higher capital commitments flowing into the former.

Capital

  • Q2 2023 emerged as the second-best
  • investment quarter, with only $72 million away from breaking the $2 billion milestone.
  • Issuers experienced an upward trend in average raises, with debt raises witnessing a significant jump.
  • Notably, there were 45 deals surpassing the $1 million mark, a substantial increase from the previous quarter.

Investors/Checks Written

  • Investor sentiment remained robust as the number of checks written increased compared to the previous quarter.
  • Although check sizes decreased slightly from the previous quarter ($1,545 vs. $1,693), they have shown an overall upward trend.

Valuations

  • Established post-revenue issuers showcased steady median valuation growth, maintaining their high valuation range since the industry’s inception.
  • Conversely, post-revenue startups, pre-revenue established issuers, and pre-revenue startups experienced valuation drops, signaling potential market corrections.

Jobs/Economic Activity

  • The industry’s significant contribution to local economies was evident; new issuers in 210 cities accounted for the highest economic stimulus since the launch of the industry.
  • Job creation and support during the quarter increased to 27.6K, bringing the total jobs created/supported to 336K since the industry’s inception.

Platforms

  • Wefunder secured the top spot as the leading platform, raising an impressive $80.8 million through 316 new offers.
  • StartEngine and Republic followed, raising $28.4 million and $13.4 million, respectively, with a significant number of new offers.

Debt Deals:

  • The debt market experienced its most successful quarter to date, with 113 new offers, signaling a tightening commercial lending market.
  • Interest rates on debt offers increased to nearly 11%, reflecting the impact of the Federal Reserve’s interest rate hike.
  • Revenue Share, a popular debt security option, witnessed a surge in the number of issuers utilizing it, with an average revenue share of 1.6.

Women/Minorities:

  • In June, 30% of all deals had a women or minority founder, and all of those deals were successfully funded.
  • However, capital allocation to women and minority founders remained relatively low, representing only 5% of the total funds committed.
  • Notable variations were observed in the average funds raised, with minority women securing the highest average amount.

In summary, the findings from Q2 2023 affirm the resilience and evolution of the alternative finance landscape. Despite minor fluctuations in certain metrics, the industry continues to showcase growth, create jobs, and attract investor interest. It would appear that the overall economic resilience is showing up as positive investor sentiment when it comes to Investment Crowdfunding. Issuers need to be made aware and efforts to promote diversity and support underrepresented founders remain crucial for a more inclusive and thriving ecosystem.

Top 100 Cities in the United States for Investment Crowdfunding

In March 2023, Crowdfund Capital Advisors released its annual report of the top up-and-coming cities for Pre-IPO startups. Each city was ranked according to our “Startup Viability IndexTM” (SVI) by the amount of money invested into pre-IPO startups, the number of fundraising campaigns, the average valuation for companies, the number of investors into fundraising rounds, the success rate of campaigns, and the number of unique industries represented. Our team of researchers calculated a score based on how impactful each category was to local entrepreneurship, technological innovation, economic stimulus, and job creation. Below is the 2023 list of the top 100. For more information on the Top 100, contact data@theccagroup.com.

Wefunder Ranked #1 Online Investment Platform – Results Come out of 2022 Industry Report

Wefunder secures the top spot among online investment platforms. The platform leads in deals funded; capital raised, and the number of investors.

DENVER, CO, UNITED STATES, February 9, 2023 /– Last week, Crowdfund Capital Advisors (CCA) released its 2022 Investment Crowdfunding Annual Report. This report is the most comprehensive market analysis of Investment Crowdfunding. Investment Crowdfunding (aka Regulation Crowdfunding) allows any startup or small business to raise up to $5 million online from their customers, family, friends, or followers. Issuers must file certain company and financial disclosures, and the offer must take place on crowdfunding platforms (aka online investment platforms) registered with the Securities and Exchange Commission and overseen by FINRA. The industry was born out of the 2012 JOBS Act and launched in 2016. The report spans 91 months of activity and covers 6,500 deals from 5,600 Pre-IPO startups and small businesses.

In 2022 over 320,000 investors deployed nearly half a billion dollars into 1,100 deals. Deal volume hit record levels within Investment Crowdfunding, and while overall capital was down from 2021 due to geopolitical and macroeconomic events, investors’ check size hit a record level. There were 78 active online investment platforms in 2022.

“Wefunder was the online investment platform leader by deals, number of investments made, and capital,” said Sherwood Neiss, Principal at CCA. “They helped deliver $164.1 million by 88,000 investors to one out of every three funded deals. An impressive feat.”

Deals like Hemp insulation manufacturer, Hempitecture out of Ketchum, Idaho, real estate crowdfunding platform Equity Multiple, and cyber security company Atakama out of New York catapulted Wefunder to the top. The syndication of Venture-led deals on the platform also made an impact.

“2022 was an exciting year for Wefunder,” said Jonny Price, VP of Fundraising at Wefunder. “With the roll-out of the “Community Round” concept — epitomized by Replit allocating $5 million of their Series B to let their customers invest alongside VCs like Andreessen Horowitz.”

Wefunder was one of the first online investment platforms to register with the Securities and Exchange Commission. StartEngine came in second for investments, $73.9M, and deals, 298, but was in third for the number of investors, 42.2K. Republic had the second highest number of investments at 71.5K and was third for investments, $63.1M, and deals, 126.

Wefunder also leads the industry in total investments, deals funded, and the number of investors since the industry launched in 2016.

When asked what 2023 would hold, Price said, “As the availability and flexibility of venture capital for founders continue to be constrained in 2023, we expect to see a growing number of founders open up ownership to their users and fans.”

A full list of platform rankings is available on crowdfundcapitaladvisors.com. The 105-page report, including 100 charts, tables, graphs, and images, is available here. Scholarships and special discounts are available by emailing sales@theccagroup.com

Seven Charts that Summarize Investment Crowdfunding in 2022

2022 was a challenging year for venture-back companies. Supply chain issues, soaring inflation, skyrocketing gas prices, geopolitical crises, and market volatility sent us on a wild ride. But there were many silver linings for Investment Crowdfunding. Last week we released our 7th annual Year in Review report. This 105-page report (our longest yet) contains 100 charts, tables, images, and maps.

Here are seven charts that sum up key findings:

Pitchbook Angel/Seed Deals are Trending Down. Investment Crowdfunding Deals are Trending Up and Hit Record Highs

Pitchbook released the “Q4 Venture Monitor First Look” that breaks down its data. While they show Angel and Seed deals declining in 2022, Investment Crowdfunding saw the most deals funded in history. Also, this trendline continues to show an increase in funded deals. As more issuers find it challenging to access capital in 2023, we expect to see them turn online for capital.

The Valley of Death is Dead Thanks to Investment Crowdfunding

Much has been written about the Valley of Death. It refers to a crucial early phase of a new venture when work has begun, but a company hasn’t generated sufficient revenue to support its growth. In this case, outside capital is a necessity that either comes from an entrepreneur’s savings or access to credit. After seven years of Investment Crowdfunding experience and the growth in average raises, we can officially announce that the ‘Valley of Death’ is dead. The average raise since the industry launched has grown to $365K, expanding beyond where the Valley existed previously; $25K to $250K. With the maximum issuers can raise now at $5 million, there is much room for successful issuers to perform follow-on raises to not only get them through the Valley of Death but beyond it.

Naysayers be Damned. Investment Crowdfunding Issuers Appear Less Risky

The profile of the average successful investment crowdfunding issuer is changing. The data finds that most of them can be seen as less risky. They tend to be older, are post-revenue, and have average revenues over $1 million. Investors see the logic. The more established issuers raised more money and had more investors than their startup counterparts. As larger, more established issuers come online, this will further derisk investment in this space.

Investment Crowdfunding has Proven its Ability to Democratize Access to Capital

It used to be that if you wanted to access Venture capital, you needed to reside in or near Silicon Valley, New York, or Boston. However, thanks to Investment Crowdfunding, we see that it has successfully been able to democratize access to capital across the country. Even more importantly, the data shows that women and minority entrepreneurs (that routinely struggle to access capital) have had greater success within Investment Crowdfunding and are raising up to 50% of the capital. Show us where else the private capital markets have been able to accomplish that!

Investment Crowdfunding is the Economic Engine we Envisioned

Issuers successful with Investment Crowdfunding are scaling startups and small businesses. They create products and services. Pay business, sales, and payroll taxes. And are massive consumers of local and regional products and services. Investment Crowdfunding issuers are responsible for pumping more than $4 billion into our economy since the industry launched in 2016. All of this capital is going into over 1,600 communities across the USA. This is a local economic stimulus unlike we’ve ever seen. If our government officials are looking for ways to promote economic development, they should focus their attention on Investment Crowdfunding issuers.

Investment Crowdfunding Makes its Namesake, “The JOBS Act,” Proud

Since Investment Crowdfunding began, Issuers successful with Investment Crowdfunding are responsible for supporting over 226,000 jobs. We believe this is an underestimate because it doesn’t take into account issuers that reported no full-time employees but either have grown to support them or outsource jobs altogether. Either way, we went to Washington, DC, and promised jobs. And one can see the industry is delivering on it! Whoever came up with the acronym “The JOBS Act” deserves an award!

Investment Crowdfunding Will Make Some Average American Investors Millionaires

Liquidity is the Holy Grail for private company investors. Why would investors pour billions of dollars into Private Equity or Venture funds if not? Investment Crowdfunding allowed the average American to play the role of mini-VC and invest in pre-IPO startups that they believe in for the first time in history. A small percentage of these will most likely go on to phenomenal exits. If and when that happens, many millionaires will be made, and they will be your next-door neighbor. Over $54B of value is currently sitting inside successful Investment Crowdfunding issuers. Only $1.6 billion has been invested to date by Investment Crowdfunding investors. You do the math. Someone is going to get rich …

And this scratches the surface. In the report, we list all million-dollar-plus raises from 2022. We analyze what would have happened if someone had just invested in all million-dollar-plus deals. And much more! Don’t wait; download your copy now!

Crowdfund Capital Advisors Announces ‘Valley of Death’ is Dead in 7th Annual Investment Crowdfunding Report

With a $5 million max, Regulation Crowdfunding canfill a void that existed in the market before

With a $5 million max, Regulation Crowdfunding can fill a void that existed in the market before

DENVER, CO, UNITED STATES, February 7, 2023 /EINPresswire.com/ — Last week, Crowdfund Capital Advisors (CCA) released its 2022 Investment Crowdfunding Annual Report. This report is the most comprehensive analysis of Investment Crowdfunding to date. Investment Crowdfunding allows any startup or small business to raise up to $5 million online from their customers, family, friends, or followers. The industry was born out of the 2012 JOBS Act and launched in 2016. The report spans 91 months of activity and covers 6,500 deals from 5,600 Pre-IPO startups and small businesses.

After seven years of experience and the growth in average raises, we can officially announce that the ‘Valley of Death’ is dead. ” Sherwood Neiss In 2022 over 320,000 investors deployed nearly half a billion dollars into 1,100 deals. Deal volume hit record levels within Investment Crowdfunding, with women and minority entrepreneurs receiving up to 50% of all the capital committed. Deals were distributed across the United States and into 687 cities including many at-risk and distressed communities.

Unlike data collected by Pitchbook that tracks Angel/Seed declining deals in 2022, Investment Crowdfunding not only saw a spike in funded deals but saw the trend increase. “This may signal that issuers are going online to raise capital from their customers, friends, family, or followers for capital versus going to Angels or VCs,” says Jason Best, Principal at CCA. “Market dynamics shifted in 2022. Angels and VCs began to pull back and focus on their portfolio investments. This forced more sophisticated issuers online for capital. We expect this trend to continue through 2022 saw the highest number of Regulation Crowdfunding funded deals while Pitchbook saw declines 2023.”

2022 saw the highest number of RegulationCrowdfunding funded deals while Pitchbook saw declines

2022 saw the highest number of Regulation Crowdfunding funded deals while Pitchbook saw declines

The data shows that the profile of issuers seeking Investment Crowdfunding capital is shifting as well. The average age of successfully funded issuers expanded past three years, with the vast majority of them being post-revenue. Established companies raised 45% more capital than their startup counterparts and had 20.5% more investors. Average check sizes rose, with the average raise trending higher.

The Valley of Death refers to a crucial early phase of a new venture when work has begun, but a company hasn’t generated sufficient revenue to support its growth. “In this case, outside capital is a necessity that either comes from an entrepreneur’s savings or access to credit,” says Sherwood Neiss, Principal at CCA. “After seven years of experience and the growth in average raises, we can officially announce that the ‘Valley of Death’ is dead. The average raise since the industry launched has grown to $365K, expanding beyond where the Valley existed previously; $25 to $250K. There has always been this talking point about the Valley of Death and doom and gloom. It should be nice to talk about opportunity and capital now that Investment Crowdfunding has proven itself.”

The 105-page report, including 100 charts, tables, graphs, and images, is available here. Scholarships and special discounts are available by emailing sales@theccagroup.com

The 2022 Investment Crowdfunding Annual Report: What a Wild Ride

Crowdfund Capital Advisors is pleased to announce the release of its 2022 Investment Crowdfunding Annual Report.

 

If you were an investor in 2022, it was quite the ride. From supply chain shortages to hyperinflation, soaring gas prices, to market volatility, rocketing interest rates, and the war in Ukraine. It was one twist after another. With the lingering effects of the pandemic still present, it is no surprise that investors pulled back.

This was equally felt in Investment Crowdfunding, where the industry saw its first down year for capital commitments. While investors showed up less, they wrote larger checks than ever. Issuers’ demand for capital shrunk as they postponed offerings, and valuations that rose to record highs earlier in the year began to crack and settled down to more normal seed round levels.

In 2022, over 320,000 Americans poured half a billion dollars into more than 1,500 offerings on Regulation Crowdfunding websites. Women and minorities were some of the biggest beneficiaries, and at-risk and distressed communities all across the United States saw deals. Over $4 billion was pumped into local economies thanks to Investment Crowdfunding and hundreds of thousands of jobs supported. Investment Crowdfunding is definitely living up to its namesake, the JOBS Act.

We share with the reader a list of all companies that raised over $1 million this year and have a case study that digs into what $1,000 invested into all deals that raised $1 million would be worth today. With $54 billion in enterprise value pent up and exits forthcoming, these average American crowdfund investors stand to gain.

We expect another volatile year in 2023 as the Fed struggles with the economy and markets react to inflation, jobs, and a pending recession. All this and much more in our 105-page report with 100 tables, charts, and images.


Our annual report is a comprehensive review of the online investment industry with a comparison to prior years and predictions for 2023. The data in the report is aggregated from all online investment platforms that are registered with the Securities and Exchange Commission (SEC) and overseen by FINRA. Each day, data is collected, normalized, aggregated, and reported to Bloomberg for industry analysis and coverage.


* The above prices are for single-license use. For a Team/Corporate license, contact: sales@theccagroup.com
** Contact sales@theccagroup.com for special discounts

Investment Crowdfunding Stumbled in 2022 – Investors Pull Back as more Sophisticated Companies Seek Capital Online

DENVER, CO, UNITED STATES, January 4, 2023 /EINPresswire.com/ — In its upcoming report “What a Wild Ride,” Crowdfund Capital Advisors (CCA) releases findings from its annual industry survey. Since launching in 2016, over $1.6B has been committed to more than 5,600 startups and small businesses by 1.6M online investors. Issuers were present in over 1,600 cities across the USA, including all 50 states, with women and minority founders benefitting greatly.

“The economic, social, and geopolitical turmoil of 2022 spilled over to Investment Crowdfunding,” says Sherwood Neiss, Principal at Crowdfund Capital Advisors. “This led to a bumpy road for the industry. While demand for capital remained strong among startups and small businesses, overall investments dropped for the first time, yet average check sizes rose. Despite this, we are seeing stronger companies come online as indicated by their age and the balance sheets.”

Investment Crowdfunding allows startups and small businesses to raise up to $5M online from non-traditional (both accredited and unaccredited) investors. It was one of the most fundamental changes to the securities law as it reversed the decades-old ban on general solicitation and allowed retail investors to access early-stage investment opportunities for the first time.

Investment Crowdfunding Headlines for 2022:

1. Demand for capital among startups and small businesses was up 1.2%, with 1,529 companies running offerings. Q4, which is historically strong, saw the first quarterly drop in demand despite 2022 having the highest percentage of post-revenue issuers seeking capital.
2. Investments into startups and small businesses dropped 12.8% from last year’s record of $578.8M, causing CCA’s Online Investment Index to fall.
3. More than 320,000 investors participated in over 1,580 offerings. Investors were down from a record 543,000 in 2021. However, their average check deployed rose from $1,065 in 2021 to $1,578 in 2022, a record high.
4. The average raise fell from $450K to $365K as issuers faced 2022 headwinds. More established companies were able to raise $1.36 for every dollar their startup counterpart raised.
5. The number of jobs supported/created among these issuers tops 250,000. Continuing to prove that Investment Crowdfunding can be a jobs engine.
6. Follow-on rounds continue to grow as issuers return to their customers/community for funding versus alternative forms of capital.
7. Average and median valuations peaked at $29.6M and $12.9M, respectively, in 2022, driven by 30 offerings with $100M+ valuations.
8. The total market value of crowdfunded companies jumped from $33B to $54.2B, increasing the opportunity for market exits via acquisitions and IPOs.
9. 71.3% of offerings were successful and closed within five months. Offerings closed two months faster in 2022 than the prior year, indicating that issuers were eager to close faster.
10. California, New York, and Texas remained the top 3 states for Investment Crowdfunding by dollars invested, successful offerings, and the number of investors.
11. The number of $1M+ offerings jumped to record highs, with 21 issuers (twice as many as in 2021) raising the maximum of $5M+, continuing to prove Investment Crowdfunding a viable “Silicon Valley-sized Seed round.”
12. Issuers used 52 intermediaries to raise crowdfunding-facilitated capital, up 21% over 2021. Wefunder, StartEngine, Republic, SeedInvest, and Equifund were the top five leaders, accounting for over 83.7% of all the funding.

“It is clear that as this industry grows, the application for its use expands,” says Jason Best, Principal at Crowdfund Capital Advisors. “This is signaled by the issuers with greater revenues coming online to raise capital from their customers and communities. The capital markets face a potential recession in 2023, which will drive more of these types of issuers online.”

“Investment Crowdfunding has found its footing,” comments Neiss. “Now that we’ve experienced a year of volatility and seen how the industry adapts and responds, we can feel confident of the role Investment Crowdfunding will play in 2023. We also predict that as we pull out of this next recession and grow into the future, Investment Crowdfunding will scale to a $2.5B annual industry in 2030.”

The principals of Crowdfund Capital Advisors co-authored the framework for Regulation Crowdfunding and were invited to the White House by President Obama for their work on the legislation. They created the industry’s first data aggregator that collects information on all Investment Crowdfunding offerings. This data is currently available via the Bloomberg terminal. They serve institutional clients, nongovernment organizations, multilateral organizations, investors, and entrepreneurs in the understanding and expansion of Investment Crowdfunding. Click here to order.

Crowdfunding Update – Q2 Ends with Mixed Results Over Q1 but Up Over Prior Period

The U.S. Securities Crowdfunding market ended Q2 mixed but showed impressive gains over the prior year. More issuers, more capital, more jobs, more revenue generating companies seeking capital, steady valuations, greater investment in certain industries (due to COVID), and average raises increasing as the new $5M cap implemented by the SEC in March went into effect.

Here’s the summary:

  • Number of offerings were up 3% over Q1 but investor commitments were down 15% and number of investors were down 21%. That being said offerings were up 46% over the same period, investor commitments were up 175% and investors were up 46%.
  • The Online Investment Index peaked in March after the new SEC rules increased the maximum raise to $5M. Investments began to trail with the index hitting a low the week of May 30th and have steadily increased since. The Index is up 213% over 2020’s average.
  • The number of pre-revenue issuers increased 6% over Q1 and 84% over the prior period. The number of revenue generating issuers increased 25% over Q1 and was flat over the prior period. 53% of all issuers in 2021 are revenue generating.
  • Across all successfully funded offerings, valuations were flat from Q1 to Q2. As well as from the same period in 2020.
  • Total enterprise value of firms that closed offerings in Q2 was up 74.5% over Q1 and up 81.5% over the same period. Total enterprise value of all successfully funded issuers is $25B. 1.2% of successfully funded issuers had valuations over $100M. Those issuers collectively had an enterprise value of $4.5B.
  • Food distribution, staffing & outsourcing, marketing services, soft drinks and real estate all saw greater than 100% growth in investments from Q1 to Q2.
  • Number of million dollar offerings was up 33% over Q1 as well as 33% over the prior period. 14.3% of offerings that exceeded $1M raised the maximum of $5M.
  • Jobs supported increased 18.4% over Q1 and 56.8% over the prior period.
Have Questions or Seeking Analysis About the Data? Click here to Schedule Office Hours with us!

Wefunder to Launch 40 Regulation Crowdfunding Offerings Today!

We have spent a lot of time recently talking about the tipping point for Regulation Crowdfunding. To illustrate what is happening, 2 weeks ago we launched the industry’s first Online Investment Index that tracks that daily Top 50 offerings. The index shows how things started to pick up in 2020 despite the pandemic with local investors stepping up to support local businesses. It also shows the momentum behind the industry.

Source: Crowdfund Capital Advisors

The peak at the end of the index reflects the changes made by the SEC on March 15th that increased the amounts issuers can raise from $1M to $5M. This is not only bringing more issuers to the table but investors as well.

To further demonstrate this, Wefunder is launching a record 40 new offerings in a single day! What also makes this exciting is the fact that these are Y Combinator companies that have been through an accelerator and may be poised for substantial growth.


In a call with Wefunder they explained why March 15th was such a big day for the industry. One of the reasons they quote is the rules now allow investors to be pooled into a Special Purpose Vehicles (SPV) and founders can more easily communicate with them. They note that conventional wisdom is starting to change, more VCs are open to syndicating deals to the crowd and companies are allocating 10 to 15% of their round to the crowd. This opens up these offerings to employees, friends, family and customers but the bulk to the risk is still on the shoulders of these more professional investors.

Wefunder, a former Y Combinator company itself says, “Now anyone can investment as little as $100 in any of these startups. The beauty is that they are investing on the same terms and valuation as professional investors in the deal.” These professional investors are performing a level of diligence on these deals which may mitigate risk on these offerings.

Issuers that are raising money on Wefunder are using the new “testing the waters” provision that allows them to see if there is enough interest in their offering before spending the time and money to complete all the disclosure requirements.  Once a company hits their target, they formally file, open their offering and collect their commitments. They still must hit their disclosed minimum funding target, or the money collected in escrow is returned to investors.

If you look at the offering page you will notice many industries represented from software application to biotechnology to personal services and more. The wide variety of offerings proves that there is investor appetite from both retail and professional investors and also counters the argument that online offerings only apply to companies that could not find capital elsewhere. Interestingly, several of these offerings are being run parallel with Venture Capital.

Make sure to check out their offering page for more information. Also make sure to subscribe to our new YouTube Channel, TheCrowd.

 

 

New Index Tracks Online Investment Offerings and Investor Sentiment – 50 Largest Equity Crowdfunding Offerings by Private US Companies

DENVER — The CCA Online Investment Index is a new tool created to gain better insight into the blossoming securities-based crowdfunding market. The index measures the online capital-raising activity of private U.S. companies. This index, which is calculated daily, is based on the capital investments received by the 50 daily highest-raising private issuers that meet certain criteria and are listed on Crowdfund Capital Advisors’ data platform.  This data can uniquely inform investment decisions, economic analysis, forecasting and government policy.

Unlike other SME indices that emphasize optimism or policy, this index ranks the top performing issuers by capital commitments. The index is a barometer of investor sentiment across industries and geographies. Since the index launched $3.2B in economic activity has been monitored.

Securities-based crowdfunding was legalized with bi-partisan support as part of the 2012 JOBS Act. It allows startups and SMEs to raise money online from retail and accredited investors. Almost 4,000 securities offerings are included in the dataset (more securities than are tracked by the New York Stock Exchange) which represent over 3,250 issuers and approximately $17.3B in Market Value in over 460 industries across 1,100 cities in the United States. The dataset is growing about 3% per month. On March 15, 2021, new rules by the Securities and Exchange Commission increased the amounts issuers can raise online leading to a spike in the most current week of activity.

CCA collates real-time offerings from over 50 securities-based crowdfunding platforms, including Amplifyx, Buy the Block, Crowdfund Main Street, CrowdsourceFunded, Equifund CFP, FundersUSA, FundMe, Fundopolis, HoneyComb, Infrashares, IPO Wallet, Mainvest, Microventures, Miventure, Mr. Crowd, Net Capital Funding, Nextseed, Nvsted, Raise Green, Republic, SeedInvest, Silicon Prairie Online, Small Change, Stampede, StartEngine, The SMBX, Title 3 Funds, TruCrowd, Fundanna, Cryptolaunch, Musicfy, VidAngel Studios, Vincinity Capital, Wefunder, and Wunderfund. As new platforms are registered with the SEC, data from qualifying companies on these platforms will be added to the index.

Companies represented on the index are operating companies raising money, not equity funds. They represent twenty sectors: Agriculture, Forestry, Fishing and Hunting; Mining Quarrying, and Oil and Gas Extraction; Utilities; Construction; Manufacturing; Wholesale Trade; Retail Trade; Transportation and Warehousing; Information; Finance and Insurance; Real Estate and Rental and Leasing; Professional, Scientific, and Technical Services; Management of Companies and Enterprises; Administrative and Support and Waste Management and Remediation Services; Educational Services; Health Care and Social Assistance; Arts, Entertainment, and Recreation; Accommodation and Food Services; Other Services; Public Administration. These companies are conducting offerings pursuant to Title II [Rule 506(c)], Title III (Regulation Crowdfunding) of the JOBS Act or both. 

Figure 2: Percent of Capital Commitments by Industry

“By looking at the index we’re able to gain a better understanding of just how much money is being raised every day through crowdfunding by the top companies in the industry,” says Sophie Dessart, CCA Analyst.  “Over time, we can see whether investors are putting more or less money into the market, giving us an idea of investor sentiment and the perceived potential of the companies currently raising funds.”

“The CCA Online Investment Index has grown year after year, but the increases seen from FY 2020 to FY 2021 have been remarkable,” says Alex Nagel, CCA Analyst. “We are almost consistently seeing index values during FY 2021 that are twice as high as the year prior. This is a strong indicator of the growth of the crowdfunding industry including accessibility, availability, and investors bullish on getting involved with some great companies.”

Each day, the leader of the index and the company with the highest capital raise can change and come from a different industry. “It’s fascinating to see the wide range of companies that can lead the index, and it really illustrates the diversity of campaigns that everyday investors are supporting through crowdfunding,” says Dessart. “For example, the leader with the highest raise on March 15, 2021 , was Immersed, a Techstars company that helps remote teams work together in a virtual workspace. They were looking to raise funding build out their platform. Three days later, on March 18, 2021, the top investment was in the media industry with the company Angel Studios, a film studio that helps creators come together with viewers to create high-quality TV and film.”

“The index can also be used to measure real-time economic recovery,” says Sherwood Neiss, Principal at Crowdfund Capital Advisors. “This index is one way to monitor local and regional economic recovery by tracking investor sentiment. We can see peaks and troughs that correlate to unique offerings, seasonality and even the impact of COVID. For instance, in the 12 months leading up to the pandemic the index average was 127.2, since the onset of the pandemic the average rose 215% or 146 points indicating greater investor interest in support SMEs across the country. The low point for the index was 23 on March 15, 2020 when our economy shut down. And the high point was exactly one year later on March 15, 2021 when it hit 3,986 after the new rules went into effect”

“We are excited about the application of this new index,” says Jason Best, Principal at Crowdfund Capital Advisors. “Not only will users be able to gauge economic impact and job creation, but we also believe the next unicorn may be one of companies represented in the index.”

Quick Facts on New Regulation Crowdfunding Rules that launch March 15, 2021

Regulation Crowdfunding from May, 2016 – Feb. 2021

  • Over 3,600 securities offerings have been filed with the SEC by over 3,100 issuers (more issuers than are on the New York Stock Exchange)
  • These issuers have
    • Had over $900M in commitments
      • 5% of offerings have been successful. Campaigns that were not only accounted for 4.6% of capital commitments
    • Supported over 110,000 jobs
    • Represent $17.3B in market value
    • Represent over 450 industries, from 1,100 towns in the United States.

Regulation Changes  on March 15, 2021

 

  Before As Of March 15, 2021 What it Means
Maximum Raise $1.07M $5M Small issuers can now successfully complete a full Series A offering online broadening access to capital to potentially thousands of enterprises that do not have access to Silicon Valley
Investment Caps (Retail Investors) Individuals may make investments based on the lower of their annual earnings or net worth

 

Individuals may make investments based on the higher of their annual earnings or net worth

 

More retail investors can diversify into local startups and small businesses they believe in with slightly larger amounts. Moving the current average investment from $750 to $1,500
Investment Caps (Accredited Investors) Individuals may make investments based on the lower of their annual earnings or net worth No caps More accredited investors who already invest into startups and SMEs will be able to do so with larger checks. This will promote lead investors within offerings and mitigate risk for retail investors given the higher scrutiny provided by accredited investors
Testing the waters No Yes Issuers can see if there is an appetite for their offering before a complete filing. This will provide efficiencies and reduce legal, accounting and offering expenses
Demo Day Pitches No Yes Issuers can pitch their offering without worrying about overstepping prohibitions on general solicitation
Pooling of Investors into a Special Purpose Vehicle (SPV) – Ability to “crowdfund a fund” No Yes Streamlines the investor communication process such that issuers can communicate with a point-person for the SPV. Investors still maintain their ownership percentages and voting rights.

Expectations for the Next 12 Months

  • Over $1.2B will be invested
  • The number of offerings to increase 40% to 1,700
  • The number of investors to double to 800,000

 

Where Does Crowdfunding Data Come From And Why Is It Important?

Regulation A+ and Reg.CF crowdfunding is allowing millions of average Americans to invest in their favorite companies. How do we know this? From crowdfunding data! In this podcast, listen to Sydney Armani from FinTech World and Woodie Neiss from Crowdfund Capital Advisors explain why we may be at a tipping point in the crowdfunding industry as they explain how crowdfund data is being accumulated, curated, and being used to guide investors and issuers on crowdfund investing – direct from the experts who wrote the framework.

Crowdfund Capital Advisors delivers strategic insights to government agencies, financial institutions, regulators and multilateral organizations seeking to both create and implement innovative strategies to utilize crowdfund investing technologies to drive innovation, job creation and entrepreneurship.

As you’ll learn from listening to this podcast, Mr. Neiss (who Mr. Armani referred to as “The Godfather of Reg.A Crowdfunding”) is at the forefront of the data being accumulated with respect to crowdfunding investing. His company compiles data on a variety of Regulation A+ and Reg.CF deals across many SEC-registered crowdfunding portals across a number of sectors and specific industries. Where is the investment capital going? How much is being invested? What are the trends? Data answers so many of these questions, and it’s all driven by artificial intelligence algorithms.

With their “CCLEAR” Dataset, you get the most comprehensive Regulation Crowdfunding database that collects information on every offering. In addition, learn how Crowdfund Capital Advisors studies and invests in the emerging ecosystem of crowdfunding and the new solutions being created that will impact the broader private capital markets through advising, speaking, and research.

Questions? Comments? Besides his Fintech World website, Sydney Armani has recently launched CrowdfundingUSA.com as a resource for those seeking more information on how issuers can raise capital via crowdfunding. Likewise, you can get more information on what Crowdfund Capital Advisors does at their website at CrowdfundCapitalAdvisors.com.


ABOUT OUR GUEST: Sherwood “Woodie” Neiss

Sherwood NeissSherwood Neiss, is a Principal at Crowdfund Capital Advisors and a Partner at Crowd Capital Ventures. He is an expert at building successful businesses. As a 3-time INC500 winner whose former company won E&Y’s Entrepreneur of the Year, Sherwood understands the keys to entrepreneurial success from concept to company to sale.

As a serial entrepreneur and investor during the credit crunch, Sherwood saw a need for a change in outdated securities laws and did something about it—as a co-founding member of Startup Exemption, Sherwood co-authored the Crowdfunding Framework used in the JOBS Act that was signed into law by President Obama on April 5, 2012.

Within Crowdfund Capital Advisors (CCA), Sherwood works with clients ranging from governments and banks that are looking for ways to boost economic development in their countries to investment firms looking for access to increased deal flow that crowdfunding creates. At Crowd Capital Ventures (CCVF), Sherwood researches, analyses and invests in promising FinTech companies focusing on all sectors of the crowdfunding market. Sherwood serves as an advisor to several crowdfunding platforms and crowdfunding technologies giving him a unique understanding and view of the industry and market. As an industry leader, Sherwood contributes to several publications including VentureBeat and TechCrunch. He additionally co-authored Crowdfund Investing for Dummies through Wiley & Son’s as well as the World Bank Report Crowdfunding’s Potential for the Developing World.

Sherwood co-founded Crowdfund Intermediary Regulatory Advocates (CFIRA) and the Crowdfunding Professional Association (CPA), and served as Governing Board Member and co-chair where he led the fight to ensure investors are protected while entrepreneurs have access to the capital they need to start and grow promising companies.

An avid public speaker, Sherwood speaks at universities and seminars around the world discussing crowdfund investing, what it takes to be an entrepreneur and how to build winning companies. He also does a large amount of work presenting to government bodies, speaking in front of the U.S. Congress, leading SEC and FINRA meetings, as well as, addressing foreign governments—testifying about how they can bring economic benefits to their citizenry through implementing their CCA’s Crowdfund Investment Framework.

Sherwood started his post-MBA career on Wall Street and moved to Silicon Valley where he completed personal and financial goals in his late 20’s he hoped to obtain in his 30’s. Wondering what to do next and also left struggling with a debilitating family dilemma, he used his entrepreneurial drive to help turn his family adversity into a multi-million-dollar company that today is helping millions of sick children, animals and adults get better by being more compliant with their medicines.

As the co-founder of FLAVORx (www.flavorx.com), Sherwood structured an approach and built a business model that threw off millions of dollars in cash while growing the business from one pharmacy to over 80% of the pharmacies in the United States. He raised millions of dollars in capital and saw the culmination of his endeavors with the sale of the company in 2007.

When not working, Sherwood is an avid traveler. He lived in Japan for a year and post-sale of FLAVORx took his second backpacking trip around the world. In addition to speaking at universities and businesses around the country he invests in real estate in the U.S. and Brazil, is part of a private equity group in Los Angeles, is working on a clean tech project in Puerto Rico and is involved with several other start-up ventures.

ABOUT OUR GUEST: Sydney Armani

Sydney Armani has more than twenty-five years’ experience in Silicon Valley, active in the community as an entrepreneur as well as an investor.

Sydney’s vision and expertise for starting and managing innovative companies have sparked and nurtured the great success of Hello Net (a mobile telephony appliance service), Minitel, and Videotex (an online first-generation of touchscreen tablets).

He has been an active keynote speaker and moderator at conferences and plenary sessions on Blockchain, Technology, Real Estate crowd finance, Cryptocurrency capital, and digital markets, secondary liquidity, disruption in banking and a host of other topics. He has lectured at major universities such as Georgetown, NYU, Hult International Business School, “Běiwài” University, Beijing, VIA Technologies, PARIS. while authoring articles for or being interviewed by INC Magazine, Housing Wire, Forbes, Fortune, The Economist, CNBC, Bloomberg and others.