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

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.

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.

 

 

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.

Online Investment Platforms Data now available as part of an Alternative Data catalog through Bloomberg

Since the 2012 US JOBS Act, pre-IPO, startup and small businesses have been raising funds online from both retail and accredited investors on investment platforms that are regulated by the SEC and FINRA. Working with these platforms, Crowdfund Capital Advisors collects and aggregates company, offering and transaction data then cleans and normalizes it. This data is now available as part of Bloomberg Enterprise Access Point. The dataset is updated daily, contains over 3,000 offerings and provides insights into over 400 NAICS code industries, current and historic valuations, and much more.


DENVER (PRWEB) AUGUST 18, 2020 — Crowdfund Capital Advisors, a leader in real time private capital markets data in the United States, announced that its data set is now available to Bloomberg Data License clients via Bloomberg Enterprise Access Point. This offers an additional way for the financial industry to discover pre-ipo/startup and small business data.

Pre-IPO, startup and small business offering data can be a primary indicator of the strength of both the startup funding market and local/state/regional economies across the United States. Many investors and analysts find data on private companies difficult if not almost impossible to source. This dataset provides insights into over 400 NAICS code industries, current and historic valuations, earnings and daily investments into offerings. Such data can help make more educated investment decisions.

Crowdfund Capital Advisors normalizes data from thousands of offerings into a single, easily digestible format. Each offering exemption can have different laws, formats and varying levels of difficulty to obtain data. There are over 100 different metrics within the dataset that include: offering date, company description, location, incorporation date, price per share, valuation, capital raised, naics code classification, summary income statement and balance sheets, number of employees and more.

Companies that raise money under some of these exemptions file annual reports that contain updated information on their financial wellbeing which can track performance over time. Others leverage these exemptions over time to raise capital and revealing how valuations change over time as well.

Crowdfund Capital Advisors has been collecting, enriching and normalizing pre-ipo/startup and small business data for online offerings completed under the 2012 JOBS Act. These offerings include 506c (accredited investor online offerings), Regulation A, and Regulation Crowdfunding since 2016. Crowdfund Capital Advisors is now updating over 3,000 private offerings from over 890 locations across the United States on a daily basis. This frequency, along with millions of records enriched each year, provides an invaluable data resource for clients in the financial sector.

Launched in September 2018, Bloomberg Enterprise Access Point is the company’s web-based data marketplace that allows Data License clients to easily discover, access and immediately use high quality, market leading content from both Bloomberg and third party providers.

About Crowdfund Capital Advisors:
Crowdfund Capital Advisors has created and perfected a data acquisition model that allows it to effectively handle large amounts of data from hundreds of online brokers/dealers as well as online investment platforms. It has proprietary software, built by its own technical team, as well as a large Data Quality team to accomplish this task. Thousands of clients have received information from Crowdfund Capital Advisors to improve their businesses.

Sherwood Neiss
Principal
Crowdfund Capital Advisors
(877) 427-2350 ext: 701
sherwood@theccagroup.com

SOURCE Crowdfund Capital Advisors
Related Links: http://www.theccagroup.com

The $62.5 Billion Dollar Main Street Co-Investment Fund that could reemploy 20 Million Americans within 60 Days

While well intentioned, a significant portion of the first round of PPP funds did not reach Main Street businesses. We need to expand a financing service already up and running in the US since 2016 that is 1) targeted at true small businesses;  2) fast – that can be rolled out in 60 days or less; and 3) harnesses communities in partnership with the government to reopen businesses that we all count on in our daily lives. How do we know it will work? The British government has run a similar program for the last 4 years with great success and no fraud.

The Federal Government can form a partnership with online investment platforms to leverage the power of Regulation Crowdfunding (Reg CF) to immediately launch a $62.5 billion dollar co-investment fund. Reg CF allows small businesses to raise money from any American as long as companies provide disclosures and leverage platforms that are registered with the Securities and Exchange Commission (SEC). This tool has been in the works for 4 years now and there has been no fraud. Most importantly, it supports small businesses in communities all across the United States in over 80 industries and supplies critically important jobs.

Why $62.5 Billion? Consider this:

  1. According to data from companies that have leveraged Reg CF, the average small business employs around 7 individuals.
  2. Between independent contractors and support vendors that provide critical products and services an additional 49 employees are supported (according to data from Paychex).
  3. This is a total of 54 direct and indirect jobs created and supported by each small business.
  4. If there are 27 million people that filed for unemployment, that’s 500,000 business affected (27 million unemployed / 54 jobs supported per business).
  5. If we assume on average they need $250,000 cash to get back up and running, the crowd comes in with $125,000 and the government matches up to $125,000 that the crowd invested. That’s $62.5 billion from the local community ($125,000 * $500,000 businesses) and $62.5 billion from the government.
  6. Together with the crowd that would be a $125 Billion dollar investment into local communities. These businesses would re-employ those individuals that lost their jobs. The money would reinvigorate these local economies.
  7. The Crowd and government could be repaid in full, with interest, over an agreed upon period of time.

How would it work?
A co-investment debt fund could engage local customers/citizens to invest in local businesses they use and trust. These lenders would have a vested interest in the outcome of the business and hence would be frequent users and brand ambassadors for the business. By investing $1 from the fund for every $1 that came from the crowd, the cash infusion would double and the oversight would be greater than traditional debt investments from banks.

This type of program could be implemented fairly quickly. Since the technology and regulation is already in place and operating, it could be immediately launched. Since the platforms that exist are already registered with the Securities and Exchange Commission as well as FINRA these platforms are known entities. The regulation already requires that companies seeking funds have disclosures necessary to inform investors so investors aren’t making blind decisions. And the framework requires that companies exceed minimum funding targets that they set, so if a company fails to reach its minimum funding target, no money is transferred to them and the crowd doesn’t lose. A co-investment fund could start as a trial and then expand if successful, thus mitigating risk and also increase speed to market.

Strategy 
The Federal government would work with online investment platforms to co-lend to America’s small businesses and entrepreneurs. The loans could be up to $500,000 with the crowd able to fund up to $250,000 and the Federal Government to match the loans, dollar for dollar, up to $250,000. (A majority of the loans would be less than $500,000 … with the mean loan being around $250,000 with half coming from the local community).

In 2012, the JOBS Act was enacted on a bipartisan basis to create new sources of funding for small businesses and entrepreneurs. There are now over 50 online funding platforms that  enable entrepreneurs and small businesses to raise money from local investors, customers, and fans. These funding portals enable businesses to raise money via debt or equity (stock) instruments. The platforms are licensed and regulated by the SEC and FINRA. This provides infrastructure to activate this program immediately.

Investment Instruments Available
While there is no limit on the type of securities a company may issue under Reg CF, it is suggested that initially, bonds, debt and revenue-based financing vehicles would be the types of securities for this pilot program.

Repayment Process
This program would be similar in structure to the PPP program, but more targeted to small businesses.

  • The maximum funding is to be determined by the Federal Government. If the pilot program is deemed successful, it can choose to expand the program over time.
  • The Federal Government could choose to forgive part or all of their portion of the funding.
  • Funds are repaid in full, first to private investors.
  • The Federal Government is repaid after all private investors have been repaid.
  • The Federal Government can choose to forgive part or all of the loans.  Examples would be to forgive 50% or 75% of the government’s portion of the loan, providing the private sector has been fully repaid on time.

Oversight
As with any type of financing, oversight is critical. The following key levers will provide oversight for the program:

  1. Fund manager provides oversight on fund operations and works with the fund administrator to deliver periodic reporting to the appropriate government agency on fund performance and operations.
  2. Fund managers engage with platforms to provide oversight.
  3. Portals provide oversight on individual company diligence.
  4. Community investors provide oversight on company performance.

We need bold action now.  This program can quickly deliver capital to the small businesses that puts millions of Americans back to work, and delivers services that everyone will depend on to start feeling some sense of normalcy back in our lives.

For details of a draft plan, contact us.

SEC to Increase Regulation Crowdfunding Cap from $1 Million to $5 Million

We are excited to share with you today’s press release by the Securities and Exchange Commission with long awaited improvements to Regulation Crowdfunding as well as other exempt offerings. These changes should significantly increase the utilization of online finance in the United States over time.

In particular, we are thrilled that the years we have spent in Washington, DC advocating for changes and represented in letters and reports from the Treasury Department have resonated with the Commission. The changes outlined below will make the industry more appealing to issuers, allow the industry to scale and make online fundraising more efficient. Many thanks goes to the hard working people at the Commission.

Over the last 4 years, the data that CCA has collected on the industry has clearly shown that these offerings are conducted in a secure, efficient and nearly fraud-free market. This demonstrates the importance of a common data standard for the industry to enable transparency in the markets for regulators and investors. Other governments around the world should take note of these newly expanded rules as they contemplate their own opening of the private capital markets.

According to the press release, here are the highlights:

Offering and Investment Limits.  The Commission proposed revisions to the current offering and investment limits for certain exemptions.

For Regulation Crowdfunding: 

  • raise the offering limit in Regulation Crowdfunding from $1.07 million to $5 million;
  • amend the investment limits for investors in Regulation Crowdfunding offerings by:
    • not applying any investment limits to accredited investors; and
    • revising the calculation method for investment limits for non-accredited investors to allow them to rely on the greater of their annual income or net worth when calculating the limit on how much they can invest.

For Regulation A: 

  • raise the maximum offering amount under Tier 2 of Regulation A from $50 million to $75 million; and
  • raise the maximum offering amount for secondary sales under Tier 2 of Regulation A from $15 million to $22.5 million.

For Rule 504 of Regulation D: 

  • raise the maximum offering amount from $5 million to $10 million.

“Test-the-Waters” and “Demo Day” Communications.  The Commission proposed several amendments relating to offering communications, including:

  • a proposed new rule that would permit an issuer to use generic solicitation of interest materials to “test-the-waters” for an exempt offer of securities prior to determining which exemption it will use for the sale of the securities;
  • a proposed rule amendment that would permit Regulation Crowdfunding issuers to “test-the-waters” prior to filing an offering document with the Commission in a manner similar to current Regulation A; and
  • a proposed new rule that would provide that certain “demo day” communications would not be deemed general solicitation or general advertising.

Regulation A and Regulation Crowdfunding Eligibility. The proposal includes amendments to the eligibility restrictions in Regulation Crowdfunding and Regulation A.  These proposed rules would permit the use of certain special purpose vehicles to facilitate investing in Regulation Crowdfunding issuers, and would limit the types of securities that may be offered and sold in reliance on Regulation Crowdfunding.

Support Innovation & Stimulate The Economy – Help us raise the Regulation Crowdfunding cap

On July 19th we submitted a letter to the Securities and Exchange Commission (SEC) providing data and analysis for why the Regulation Crowdfunding cap should be increased from US$1.07M to US$20M. The letter was signed by the largest Regulation Crowdfunding platforms in the industry as well as leading industry influencers. Since then a petition was created on Change.org by SeedInvest and it is starting to gain traction. Washington does pay attention to numbers, so we encourage you to take 2 seconds to sign the petition and share your voice as to why you support increasing the cap. Below is a letter SeedInvest’s CEO, Ryan Feit sent to all their supporters that provides further rationale.
  

This past week I, along with other industry advocates, delivered a letter to Securities and Exchange Commission (SEC) Chairman Clayton urging the SEC to raise the Regulation Crowdfunding (CF) cap from $1 million to $20 million. When we helped pass The JOBS Act more than six years ago, Congress almost unilaterally agreed with us that startups and small businesses needed better access to capital in order to create more jobs. Although we’ve made great strides to launch an entire industry on the back of these historic changes, we as an industry still have a lot of work left to do. Recent data suggests that, despite the passage of the JOBS Act, the fastest-growing (and job creating) startups and small businesses are still shut out from equity crowdfunding due to the current regulatory constraints.

We have shared below what we believe are a few of the most compelling arguments for expanding Regulation Crowdfunding. If you agree with our findings, we ask that you show your support by signing the petition to increase the Regulation Crowdfunding cap.

Less Venture Capital

Since the passage of The JOBS Act, access to capital for early-stage startups and small business has actually become more challenging. Over the past six years, seed-stage venture capital managers have moved up-market to launch larger funds and invest in later-stage deals. This trend has resulted in a vacuum at the traditional Seed stage, as well as a corresponding, sharp decline in investment activity. After a couple boom years (2013-2015), the number of traditional Seed stage deals declined 41% and the number of dollars invested has also declined dramatically1.

Problematic Regulatory Gap

Meanwhile, as early-stage venture funds decline, the number of companies looking to raise early-stage capital has actually increased, leading to a supply-demand imbalance. As a result, there is large demand from companies looking to raise $1-$20 million through non-traditional channels, but regrettably, the current regulatory framework is untenable. Unfortunately, Regulation Crowdfunding is capped at $1 million and Regulation A+ requires substantial upfront costs and disclosures as well as onerous ongoing reporting and audit requirements. As a result, Regulation A+ is not a great fit for companies which are not looking to raise a more significant amount of capital.

Net Job Creators

Studies have shown that these high growth startups which need to raise $1-$20 million are the very same companies which create jobs in America. Recent SBA research suggests that these companies, which typically have 20+ employees and have been in operation for one to five years, play a significant role in net job creation. We frequently encounter these types of companies that have already raised an initial round of $500k to $1 million and are now looking to raise $5-$20 million in order to accelerate their growth and hire rapidly.

Proof From Abroad

In the United Kingdom, equity crowdfunding has been around for five years longer than the US and has a higher, $10 million maximum-resulting in a much more robust dataset than exists in the US. What we see in the UK is that equity crowdfunding has now become the preferred way for startups and small business to raise capital. In fact, the Cambridge Centre for Alternative Finance recently found that in just a few years, equity crowdfunding has grown to account for a whopping 17% of all seed and venture stage equity investment in the UK. Furthermore, equity crowdfunding has clearly helped to bolster the innovation and job boom in the UK over the past seven years, with the Centre for Economic Performance at the London School of Economics reporting that two thirds of the new jobs in the UK since 2008 have come from small and medium businesses.

In the US, although we have less data, we have also seen healthy results over the last two years. So far, 715 companies that support 4,172 jobs have raised capital through Regulation Crowdfunding. In addition, early findings suggest that women and minorities have had much greater access to capital, as well as higher success rates, through equity crowdfunding than through traditional channels.

No Fraud, Few Regulatory Challenges

Furthermore, despite meaningful fundraising activity through Regulation Crowdfunding, there have been zero reports of fraud thus far. Back in 2011 and 2012, during our discussions on Capitol Hill, it was suggested that the $1 million Regulation Crowdfunding cap was merely a starting point. At this point, there is sufficient data to show that equity crowdfunding has been effective at providing greater access to capital for startups and small business without materially increasing the risk of fraud. But the true potential of equity crowdfunding is still critically constrained by the arbitrarily low fundraising cap of $1 million per year. In The U.S Department of The Treasury’s October 2017 report, A Financial System That Creates Economic Opportunities, Treasury recommended increasing the Regulation Crowdfunding cap and pointed out that the SEC has the requisite authority to do so. Like The Treasury, we ask that the SEC consider revisiting and raising the current cap.

Show Your Support

If you agree with these points, I encourage you to read our letter to the SEC and to add your support to our Change.org petition. Please also help us spread the word to fellow entrepreneurs and investors. In a few weeks we plan to share the list of supporters with Chairman Clayton which will hopefully prompt additional dialogue with the SEC.

Prominent Group of Fintech Leaders Send Letter to SEC Chair Jay Clayton Seeking an Increase in Regulation Crowdfunding to $20 Million

The following is a reprint of a story regarding the letter CCA coordinated to increase the Regulation Crowdfunding cap to US$20M. The original can be found here.

In a letter forwarded to Securities and Exchange Commission (SEC) Chairman Jay Clayton, a group of Fintech leaders demanded the Commission to increase Regulation Crowdfunding (Reg CF) from the current $1.07 million max amount to $20 million – a substantial increase to current rules. The demand to increase Reg CF, an iteration of securities crowdfunding that was created by the JOBS Act of 2012, comes at a time when there is pressure for the US to maintain is position as a leader in investment crowdfunding the space. As pointed out by the signatories, both Germany and the UK have increased their crowdfunding threshold to €8 million (USD $9.4 million). The European Commission may move to make this a pan-European threshold with some EU insiders pushing for a higher amount.

The letter was sent under the letterhead of Crowdfund Capital Advisors (CCA), co-founded by Sherwood “Woodie” Neiss and Jason Best. The two founders were vital to the passage of the JOBS Act when President Obama signed the bill into law.

Neiss told Crowdfund Insider;

“Each of the parts of the JOBS Act served a niche well except for those companies that liked the idea of crowdfunding from Main Street investors without the costs of a Title IV (Regulation A+ offering). By increasing the maximum an issuer can raise to $20 million under Regulation Crowdfunding, we can now fill this void and allow a broader spectrum of small issuers into the marketplace. With 2 years of history and data under our belt, we can see that the system is working, capital is flowing, jobs are being created and money is being pumped into our economy. Rather than ask for another de minimus increase in the cap, let’s raise it to an amount that will really allow the industry to take off but in the same systematic and transparent way that benefits issuers, investors, and regulators.”

Neiss, in an email to Chair Clayton, said “the United States should not be left behind, but should make the bold move to increase the cap to $20 million.”

The SEC has the ability to act and such a move would most likely have the support of much of Congress and most likely the Executive branch. The question is whether, or not, Chair Clayton will be willing to take such a bold move that will clearly support small business and capital formation – a policy area Clayton has consistently said is one of his top leadership priorities.

The letter to Chair Clayton was signed by the following crowdfunding industry leaders:

  • Sherwood Neiss – CCA
  • Doug Ellenoff – Ellenoff, Grossman & Schole
  • Youngro Lee – CEO of NextSeed
  • Tyler Gray – COO of Microventures
  • James Dowd – Managing Director North Capital
  • Kendrick Nguyen, CEO of Republic
  • Ryan Feit – CEO of SeedInvest
  • Karen Kerrigan – Small Business and Entrepreneurship Council (SBE Council)
  • Ron Miller – co-founder of StartEngine
  • Nick Tommarello – CEO of Wefunder

The letter is available for download here and is re-published below.


July 19, 2018

The Honorable Jay Clayton
Chairman
U.S. Securities and Exchange Commission 100 F Street, NE
Washington, DC 20549

Dear Chairman Clayton:

We compromise the largest online crowdfunding platforms and industry influencers in the United States. Given the positive early results since 2016 for both entrepreneurs and investors, we believe the time has come to raise the maximum amount an issuer can raise via Regulation Crowdfunding (Reg CF) from US$1M to US$20M. Please keep in mind that during the 2 years of this new exemption there has been no fraud and very limited regulatory issues.

Since the launch of Regulation Crowdfunding:

  • Over 1,000 companies have filed with the SEC to raise money on online platforms that are registered with FINRA to facilitate capital formation.
  • Over $137M has been committed to these issuers. 95% ($130.4M) of that capital was funded and invested into 715 companies (68.5% success rate).
  • These 715 companies are supporting 4,172 jobs and producing over $249M in revenue.
  • Issuers have filed in almost every state in the Union.
  • Issuers have been funded in 80 industries (according to Morningstar’s Global Equity Classification Structure).

The cap should be adjusted because:

  • There has been zero fraud, competent issuers have been able to raise serious capital from investors that believe in their products or services, and retail investors (for the first time in recent history) have a transparent, systematic way to back companies they believe in.
  • Successfully funded companies are supporting and creating valuable jobs and providing substantial economic activity in a broad range of locally important industries all around the United States.
  • The initial cap of US$1M was meant to be adjusted. Only once since the launch of Regulation Crowdfunding has this been adjusted and at the time only by $70,000. Such de minimus adjustments do not fully allow meritorious issuers to fully benefit from this new form of online finance nor expand the opportunity for issuers seeking to raise in excess of $1M.
  • The current $1M level is now far below what startups and SMEs need for seed stage capital. May 2018 data indicates that the median sized funding round for Angel or Seed stage companies in the US is $2M. This means that even for the smallest funding round the current limits do not allow an issuer to raise their entire round via Regulation Crowdfunding. This dramatically increases costs and time spent on raising capital by US businesses. This reduces the number of American innovators and job creators in the United States.
  • While the “funding gap” that Regulation Crowdfunding was meant to address is filling the void. The funding “opportunity” really comes from those small/medium firms that are seeking to raise up to $20M. Raising funds under $20M has become increasingly challenging as Venture Capital/Private Equity has moved upstream over the past decade. Raising the cap will allow issuers that wish to utilize this form of online finance the ability to raise in excess of $1M and tap their local investors without having to deal with the costly, time consuming process of either filing a full prospectus with the SEC or spending hundreds of thousands of dollars on a private offering.
  • Many companies forego Regulation Crowdfunding in favor of Reg D, 506(c), because of the low Reg CF limit. This has the effect of reduced disclosure to investors, since Form D provides less information even than Form C. In addition, ordinary investors are cut out of some of the most attractive deals that have already attracted institutional funding, which seems unfair and counter to one of the goals of Reg CF.
  • Both the United Kingdom and Germany have adjusted their caps to 8M EUR (US$9.4M). The United States should not be a follower but a leader

In a FINRA live chat with Robert Cook you said, “I continue to worry that retail investors do not have access to as broad a slice of our capital markets as I would like them to have. Said another way, you have private capital and public capital. Retail investors can really only participate in the public capital, and to the extent private capital has become so robust, you’ve shrunk opportunities. That bothers me a bit. If that trend continues, a much more select group is participating in the growth of the economy.”

We believe increasing the caps on Regulation Crowdfunding will address your concerns and invite more retail investors into a systematic, transparent part of the private capital markets that is creating jobs and providing valuable economic stimulus.

We kindly urge you to adjust the maximum amount an issuer may raise to $20M. Sincerely,

Sherwood Neiss, Crowdfund Capital Advisors
Doug Ellenoff, Ellenoff Grossman & Schole
Youngro Lee, CEO NextSeed
Tyler Gray, COO Microventures
James Dowd, Managing Director North Capital
Kendrick Nguyen, CEO Republic
Ryan Feit, CEO SeedInvest
Karen Kerrigan, Small Business and Entrepreneurship Council Ron Miller, CEO StartEngine
Nick Tommarello, CEO Wefunder

2017 State of Regulation Crowdfunding Report

The 2017 State of Regulation Crowdfunding –
U.S. Securities-based Crowdfunding Under
Title III of the JOBS Act[1]

Regulation Crowdfunding allows startups and SMEs to raise up to $1,070,000 per year from both retail and accredited investors by utilizing registered funding portals (or broker-dealers) to conduct exempt offerings online. This exemption requires issuers to file in a Form C and post online disclosures about a company’s operations, team, financials and other material information for investors to review. Regulation Crowdfunding started in the United States on May 16, 2016. The second calendar year for the industry ended on December 31, 2017. Because data about issuers, their financial wellbeing, and the capital that is committed is public information we can analyze the data and bring transparency to a segment of the markets (exempt private offerings) that has been fairly opaque until the JOBS Act went into effect.

Show me the CCLEAR Regulation Crowdfunding Dashboard

Key findings:

  • The number of unique offerings increased 267%[2] from 178 in 2016 to 481 in 2017
  • Proceeds increased 178% from $27.6 million in 2016 to $49.2 million in 2017. Total proceeds by the end of 2017 was $76.8 million
  • The number of successful offerings increased 202% from 99 in 2016 to 200 in 2017
  • The average success rate of offerings to date is 66.7%
  • The total number of investors in Regulation Crowdfunding increased 158% from 28,180 in 2016 to 44,433 in 2017
  • Issuers that filed annual reports and reported creating jobs created on average 13.9 jobs.
  • Revenues for Issuers that filed annual reports increased on average 131% between the year in which they leveraged Regulation Crowdfunding and the Prior Fiscal Year.

Analysis:

  • The results of this data show that the market, while still in its infancy, is growing at a rapid pace.
  • The velocity of capital into funded offerings appears to be steady without showing signs of abnormal activity or irrational investor behavior.
  • The rapid increase in the number of offerings and investors proves that there is appetite for Regulation Crowdfunding from both issuers seeking capital as well as investors looking to diversify.
  • Given the high success rate for offerings, Regulation Crowdfunding represents a very structured yet viable alternative for access to capital for startups and SMEs.
    Given the ability for firms to leverage capital raised to scale operations and create jobs, Regulation Crowdfunding should be promoted by local Chambers as well as the Small Business Administration.
    Given the lack of irregularities or fraud, Regulation Crowdfunding (and the structure under which it provides for transparency), should be advocated by policy makers and government organizations.

Conclusion:
2017 represented a strong first complete calendar year for Regulation Crowdfunding. We expect the industry to exceed $100M in funded offerings during the first quarter of 2018. When considering the growth of securities-crowdfunding globally, we expect the market to reach $1B in funded offerings within the next 5 years. This can be further supported by making adjustments to the exemption that would allow for greater issuer caps.

In looking for how to consider the growth rate and size of this market over time, one can look at the UK market for data. With now 5 years of active equity crowdfunding in the UK, according to Cambridge University’s Center for Alternative Finance, in 2017, 17% of all seed stage capital in the UK came via equity crowdfunding. The CCLEAR database will continue to track these markets both domestically and globally as we begin to offer services to other regulators outside of the United States.

Download the full report here.

 

[1] This report is an excerpt of a report we wrote for the Securities and Exchange Commission (SEC) that summarizes the year end cumulative results for Title III of the JOBS Act (aka Regulation Crowdfunding)
Show me the CCLEAR Regulation Crowdfunding Dashboard

[2] Given Regulation Crowdfunding started on May 16, 2016, the first calendar year of Regulation Crowdfunding only encompasses 7 ½ months. Had it been a full calendar year, this growth percent would have likely been lower.

Regulation Crowdfunding Offerings Surpass 500

Today marks a milestone for Regulation Crowdfunding. The 500th company has filed with the Securities and Exchange Commission to raise funds via online portals. The chart below show the cumulative number of offerings since the launch of Regulation Crowdfunding on May 16, 2016. Since then 51% of these companies have raised over $66M from over 65,000 investors.

A key take away from the image is the rate of growth in offerings from 2016 to 2017. 2016 ended the year with 188 total offerings. 2017 is into its 3rd quarter and has already hit 500 offerings; a 266% growth over 2016 offerings … with another quarter yet to come.

Top Regulation Crowdfunding Industries by City & State

June 30, 2017 ended the first full Fiscal Year of Regulation Crowdfunding. The first year saw a healthy start with over $51.3M being committed to almost 400 campaigns. Companies seeking Regulation Crowdfunding can raise up to $1,070,000 from retail investors provided that they do so on platforms that are registered with the Securities and Exchange Commission (SEC) and provide certain disclosures to investors.

Crowdfund Capital Advisors built a database to aggregate all the data about companies issuing Regulation Crowdfunding securities. This database has the most industry-wide data out there. For each company over 80 data points are collected. This information is analyzed and reported during quarterly webinars as well as to industry stakeholders in private events.

The following is a report from CAFDAB (The CCA Crowdfunding Database) that shows the Top Industries by City and State. For more information/analysis, email us.

Source: Crowdfund Capital Advisors

                                                      Source: Crowdfund Capital Advisors