Can Wefunder Maintain its Lead in Deals and Dollars?
(Reprint of Venture Beat Article)
With one year of Regulation Crowdfunding complete the data is beginning to tell a story about portal activity and what issuers need to know. Since Regulation Crowdfunding began on May 16th last year, 335 companies have filed offering documents with the Securities and Exchange Commission (SEC) to raise up to $1M on securities-based Crowdfunding platforms. Of those companies, 43% were funded, 30% failed and the remainder are still open and trying to get funding. Total capital committed was in excess of $40M, the average successful crowdfunding campaign raised around $282,000 and it did so from about 312 investors. According to Figure 1, the most recent quarter ending saw the greatest number of companies file with the SEC. This signals that issuers might finally be catching on to the opportunity that Regulation Crowdfunding holds.
26 portals registered with FINRA to help companies sell Regulation Crowdfunding securities. 9 of those companies have already closed, gone out of business or been shut down. Of those remaining (Figure 2), Wefunder (San Francisco/Massachusetts-based) is leading the pack in deals and dollars. They have been in business since Regulation Crowdfunding went into effect and have funded 63 companies with almost $18M in capital. Start Engine (Los Angeles) with 27 campaigns funded is in second while Microventures (Austin), NextSeed (Houston), SeedInvest (New York) and Republic (New York) hold close in third thru sixth places. Interestingly enough, the location of the platforms also matches the states that have raised the most capital. Several platforms (both old and new) have only funded a handful of campaigns and dollars. This may signal that brand awareness and marketing by the larger incumbents may be driving both companies seeking capital and investors looking for deal flow.
However, If you dig a little deeper (Figure 3) and look at the capital raised during the last 3 Quarters you will see in that while Wefunder is leading in overall dollars, both Microventures and Start Engine were not far behind in terms of Quarterly commitments (see Orange bar to compare Q1, 17 results). Microventures, the offshoot of Rewards-based crowdfunding platform Indiegogo only launched at the end of last year and is already showing strong results with 100% campaign success. While they haven’t run many campaigns, the campaigns that they have run have raised slightly more than Wefunder (Figure 4). Going forward we expect that Indiegogo will put time and energy into converting its most successful rewards campaigns into equity campaigns on Microventures. This will make them a strong contender in the marketplace. Start Engine with its strong performance in the Transportation, Software and Entertainment/Media sector will also be a strong contender as will Republic, the offshoot of Angelist and SeedInvest.
If you are an issuer you might be most interested in success rates. While Wefunder has the most deals and raised the most money in aggregate it holds second place in terms of the average raise per successful campaign. Microventures took the prize with $286,334. For the moment this is a competitive advantage as Microventures moves from its go-to-market strategy to its market expansion one. Nonetheless, Start Engine and SeedInvest aren’t far off and will most likely be appealing to issuers as well. Net-net, now that the industry is a year old, has seen steady growth with relatively little mishaps we expect the next year to be even more competitive. Wefunder got out of the gate strong, but can they hold up to the portals with deep pocket VCs behind them?