| The Coronavirus is taking the financial markets by storm. It began its attack on the public markets around February 12th. Since then, the markets have dropped 30% off their highs and have made wide swings from one day to the next. It has been one of the most volatile periods in history. While we have yet to see how everything will play out, it is encouraging to see that this volatility has seemingly not had the same impact on private funding online. The data shows that people are still investing in their local businesses via online platforms. And their numbers are growing year over year. This will play an important role as we emerge out of this pandemic. We wanted to understand what is happening, so we dug into the data, reached out to a few platforms, and this is what we learned.
Since February 12th, over $11.6 million has been invested into over 320 active companies, who are raising money on 13 online investment platforms. Over 21,000 investors have made individual investments into these companies. Comparing this to the same period last year, $9.8 million was invested into 227 active companies on 17 platforms by over 11,000 investors. There were 41% more active companies during the same period last year. The amount invested was up 16.3%, and the number of investors engaged was up 90%. All of these select private market indicators were up despite the public markets being in a free fall.
The image below shows period over period activity from February 12th to March 18th. What we see is that, despite the volatility in the public markets, this segment of the private capital markets appears to be withstanding the negative impacts … for now.
There have been several breakout companies during this period of public volatility. The list below shows the top 10, who they are, where they are based, where they are raising funds, and how much they’ve raised during this period.
| Company |
City |
Listing URL |
Amount Raised Between 2/12/20 and 3/18/20 |
| Mightly Quinn’s |
Passaic |
https://www.seedinvest.com/mightyquinns/series.b |
$1,075,619 |
| Lost Spirits |
Vernon |
https://wefunder.com/lost.spirits |
$1,070,000 |
| Black Sands Entertainment |
Brooklyn |
https://wefunder.com/black.sands.entertainment |
$480,000 |
| Ample Foods |
San Francisco |
https://republic.co/ample-foods |
$295,836 |
| McSquares |
Denver |
https://wefunder.com/mcSquares_The_Art_Of_Whiteboarding |
$282,207 |
| Neurohacker |
Carlsbad |
https://wefunder.com/neurohacker |
$277,529 |
| Called Higher Studios |
Franklin |
https://www.startengine.com/called-higher-studios |
$274,730 |
| GenesisAI |
Allston |
https://wefunder.com/genesis.ai |
$263,725 |
| Copperworks Distilling |
Seattle |
https://wefunder.com/copperworks.distilling |
$259,637 |
| Fisher Wallace |
New York |
https://www.startengine.com/fisherwallace |
$249,693 |
We asked some of the platforms for their thoughts on why the private capital markets might be operating differently from the public ones. Ryan Feit, CEO of SeedInvest, shared an interesting perspective. As he put it: “Sentiment is good. Venture will freeze up and entrepreneurs will need to utilize alternative sources of capital more than ever. On the investor front, the public markets will undoubtedly take a toll but given that the private markets have a low correlation to public and with interest rates at zero, hopefully people will continue to shift capital away from traditional assets.”
Chuck Pettid, CEO Republic Crowdfunding Portal, said “Investors may be starting to turn more to private markets because their numbers don’t move so rapidly as we’ve seen in the public markets.” Over the past week he’s heard that “Investors are looking for more long-term stability and when I see this being repeated it ends up being a theme.” Given the high volatility in the public markets this might be a reason to increase one’s diversification. “Sure some startups will fail but not in one day,” he says “it will take time.” When asked why he thinks people are investing, he shared “People are looking to diversify while some are investing strictly out of support. They want these businesses to be around and these investors can play an important part in America getting back on her feet.” When asked if he’s sees any correlation between the markets he remarked that the periods where the stock markets took deep dives, they saw very little investments happening on their platform but when it picked up, so did their volume. And while investors in this segment of the private markets can cancel their investments he acknowledged that they are seeing very little of that.
Jonny Price, Director of Fundraising at Wefunder felt “It is too early to tell. While he could certainly see how this crisis would lower investment volume March 2020 has been is our best month ever already.” He also agreed with Pettid and Feit above by stating, “You can make a case that when the stock market is crashing, investors will seek alternative investment opportunities. And when conventional sources of capital dry up (e.g. VC), more founders might turn to their fans and customers for capital.” His last thought was most poignant, “High level — if there was ever a historical moment for a democratic and people-powered financial system, this would seem to be it.”
We will continue to monitor this segment of the private capital markets to see how they are impacted. We will also share with you stories coming from both the platforms and the companies raising money on them that are focused on COVID-19. In the meantime, it is heartening to see that investments haven’t trailed off. At some point we will come out of this downturn, when we do these startups and small businesses will play an important role in helping to reinvigorate local economies and provide valuable jobs. Two of the things that seem most impacted by the coronavirus to date. |
