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.

BREAKING NEWS – Investment Crowdfunding Surges as Industry Exceeds $1.1B in Financing – 2022 to Double 2021 Investment Volume in Upcoming Report

Investment Crowdfunding Surges as Industry Exceeds $1.1B in Financing – 2022 to Double 2021 Investment Volume

DENVER, COLORADO, January 4, 2022 — In its upcoming report “Time to Celebrate Success,” Crowdfund Capital Advisors (CCA) releases findings from its annual industry survey. Since launching in 2016 over $1.1B has been invested into 4,850 startups and small businesses by 1.3M investors. Issuers were present in over 1,300 cities across the USA and in all 50 states. It is particularly important to note that 50% of all crowdfund investments made in the last 5 years occurred in 2021.

“2021 was the tipping point for Investment Crowdfunding,” says Sherwood Neiss Principal at Crowdfund Capital Advisors “Investors poured capital into next-gen startups at a record rate, entrepreneurs launched offerings at a record pace, and Venture Capital which once ignored these issuers, are now actively seeking early deal flow in the space.”

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 laws as it reversed decades old ban on general solicitation and allowed retail investors for the first time to access early-stage investment opportunities.

Investment Crowdfunding Headlines for 2021:

  1. Investments into startups and small businesses up 140% over 2020, shattering last year’s record, exceeding the projection of $500M invested, and leading CCA’s Online Investment Index to record highs.
  2. Total financing in 2021 exceeds all investments from 2016 through 2020.
  3. More than 540,000 investors participated in over 1,500 offerings. More than 2019 and 2020 combined.
  4. Average raise across the industry jumps to all time high of $450K from a low of $200K in 2018 as the number of jobs supported/created among these issuers exceeds 180,000.
  5. In March, SEC updated the maximum issuers can raise from $1M to $5M, the industry then surpasses $1B in funded capital in October.
  6. Follow-on crowdfunding rounds were raised by over 500 issuers.
  7. The market value of crowdfunded companies jumped to $33B as median valuations rose in tandem to the broader early-stage market.
  8. 68.4% offerings were successful and closed within 7 months, which is higher and faster than “traditional” VC round timelines.
  9. VCs & Y-Combinators jump into the space both co-investing and syndicating offerings providing further validation.
  10. The number of $1M+ offerings jump to record highs with several $5M+ rounds proving Investment Crowdfunding a viable “Silicon Valley-sized Seed round.”
  11. Issuers used 43 intermediaries to raise crowdfunding facilitated capital, up 10% over 2020. Wefunder, StartEngine, Republic and SeedInvest, the top leaders, accounted for over 80% of all the funding.

Trends that will shape Investment Crowdfunding in 2022:

  1. Expect a rally as the Fed reacts to high inflation by raising interest rates, investors taking chips off the public markets and diversifying into Investment Crowdfunding.
  2. Expect over $1B expected to be invested in 2022 by more than 1M investors into 2,500 new issuers.
  3. Software companies which saw a 4x increase in online funding in 2021 will leverage Investment Crowdfunding as the de facto area for primary funding.
  4. The success and ease of remote working coupled with employer dissatisfaction will lead to more entrepreneurs starting local businesses and seeking capital from their communities.
  5. 76% of investors believe it is important to fund Woman and Minority entrepreneurs. Investment crowdfunding has proven itself as a scalable way to do that.
  6. As investors seek higher potential returns, we expect further that diversification into Investment Crowdfunding will increase.
  7. Investment Crowdfunding delivers dollars, customers, and brand advocates to business owners. This will continue to be a powerful combination of benefits for entrepreneurs.
  8. Investors will expand their activity from local to nationwide into industries they follow as well as into businesses that have raised significant capital online.
  9. Existing Investment Crowdfunding issuers return online, expect deal activity to increase, fundraising conditions to improve and jobs to follow.
  10. With most successful issuers expanding their workforce and expecting revenues and earnings to increase, Venture Capital will be combing for potential winners.

“Regardless of where the market cycle takes you in 2022, private equity and venture capital investors are all looking to earlier stage companies to deliver future alpha. Companies that have raised a round of crowdfunding and are in venture-investable businesses, with demonstrated product-market fit, may benefit from this trend” says Jason Best, Principal at Crowdfund Capital Advisors. “I believe that 2022 will be a great year for entrepreneurs.”

For more information, please visit CrowdfundCapitalAdvisors.com. To pre-order the 2021 Annual Report click here.

How to Invest in Startups

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.

Sherwood Neiss to Ivy Family Office Meeting – Securities Crowdfunding Shows Much Promise with New Avenues for Liquidity

Last week, Sherwood Neiss, one of our Principals, had the opportunity to speak to the Ivy Family Office Meeting about the state of the online investment industry. Sherwood gave an overview of the different exemptions under which companies are raising money online, dug into some of the Bloomberg data coming from the online investment platforms and provided 2 case studies:

  • one on debt offerings that shows attractive average yields and
  • the other on the positive impact coronavirus has had on capital formation

You can watch the replay by clicking the video image below. You can download the presentation by clicking the image right below this.

Click the image to download the presentation
CrowdFunding 2021 12 9 20 IVYFON Miami

For more information, please contact: sherwood@theccagroup.com

Federal Reserve Needs to Pivot to Get Capital to Main Street Businesses

NEWS

For Immediate Release

Washington, D.C. –  The Federal Reserve’s Main Street Lending Program has been a bust for small businesses, and billions of additional dollars are sitting idle in the Paycheck Protection Program (PPP) due to its expiration. Still, Main Street businesses across America are in desperate need of capital to readapt, operate effectively, or simply survive the COVID-19 economy. That is why Small Business & Entrepreneurship Council (SBE Council) president & CEO Karen Kerrigan, and the principals of Crowdfund Capital Advisors (CCA), Jason Best and Sherwood Neiss, are urging the Federal Reserve to leverage a proven solution to broadly deliver capital to small businesses in need.

“Small business owners and entrepreneurs cannot afford for Washington to get stuck, but it seems our elected officials and policy leaders have reached that point. They need to fully explore innovative ideas to fuel capital formation and access, and a co-investment fund is one that will leverage local capital through federal support. It utilizes the power and security of regulated crowdfunding to drive capital to local businesses and startups, providing a turn-key solution that can be implemented quickly and with existing regulatory guardrails,” said Kerrigan.

The latest report from the Federal Reserve reveals that the Main Street Lending program has lent approximately $4 billion of the $600 billion available with just 420 loans made. And these are bigger loans with an average loan size of $9.6 million.  The results are an extremely poor showing for a program that was supposed to focus on boosting Main Street businesses by providing a bridge to economic recovery. The program was established with $75 billion in equity provided by the Treasury Department from the CARES Act, and with approval from the Treasury Secretary.

“The bottom line is that the Main Street Lending Program is a bust for Main Street. It’s time for the Fed to pivot like so many small businesses are doing. Members of Congress have urged Chairman Jerome Powell to think innovatively about how the Fed can deliver some of the massive amount of capital it is sitting on to Main Street businesses. A co-investment fund is a simple, safe and transparent way of doing that,” added Kerrigan.

A Main Street Recovery Co-Investment Fund would utilize the power and protection of regulated crowdfunding to supercharge local investment. The model that has been successfully utilized in the U.K., and offers a turn-key approach for the Federal Reserve to put to use some of the billions of dollars in capital that is currently sitting idle. SBE Council and CCA are asking the Fed to set aside $20 billion of that unused capital – a tiny fraction of what is available – to launch a co-investment fund.

“It would appear under procedures for emergency lending under Section 13(3) of the Federal Reserve Act that the Fed has the power to allocate such funds,” says Neiss. “The fund would be ‘broad-based,’ tied to debt-type instruments, and used to aid Main Street businesses to fund the gap until restrictions are lifted on consumer behavior. Given the unusual and exigent circumstance we are in, this appears to be the emergency time to create this fund,” he added.

Despite the pandemic, interest among Main Street businesses to raise money from their customers and community has increased dramatically. The number of offerings has increased 47.5% since February alone, according to data from Crowdfund Capital Advisors. Investments over the same period are up 300% and the number of local investors is up 99%.

“This is just over the past 9 months,” says Neiss. “Clearly the data is showing that despite the pandemic, both Main Street business and Main Street investors are eager to keep their local businesses alive. This co-investment fund will only further the positive results we are seeing in the data.”

“If the Fed would direct just 3% of the $600 billion already allocated to support SMEs it could deliver up to $250,000 to at least 80,000 businesses.  This is a 200x greater impact than has been achieved to date by the Main Street Lending Program.  This can be done using existing technology, existing regulation and existing industry data standards that provide for real-time transparency and oversight of every dollar.  This data is already being used by Bloomberg clients to track SME sentiment and activities,” added Best.

Recently, SBE Council and CCA released the report “Regulation Crowdfunding by Congressional District: A Report Card,” which reviews the progress of investment crowdfunding since 2016.  The Jumpstart Our Businesses Startup Act (JOBS Act) of 2012 enacted changes that ushered in investment crowdfunding, which officially launched following the finalization of Securities and Exchange Commission (SEC) rules in 2016. As noted in the report, there have been no cases of fraud with investment crowdfunding. And the democratization of capital is truly taking hold through investment crowdfunding, which allows small business owners to more easily identify investors and raise capital using SEC regulated platforms. Ninety percent of U.S. House Congressional districts (393) have had a regulated crowdfunding offering, and woman and minority entrepreneurs are finding significant success accessing capital via investment crowdfunding.

You can learn more about the co-investment fund by watching SBE Council’s recent webinar on how it works here, or watch Kerrigan’s appearance on FinTech television here.

Related Content:

Q&A: CCA and SBE Council on the Main Street Co-Investment Fund Idea, Start Us Up.

Crowdfunding Success Indicates Small Businesses and Startups Worthy of Government Matching Fund, Forbes.

ABOUT CCA

Crowdfund Capital Advisors (CCA) is a consulting and advisory firm. Its principals created the framework that became the basis for Regulation Crowdfunding. They have testified in front of 5 US House and Senate Committee Hearings on the subject and authored a book and World Bank report on the topic. They created the CCLEAR database that collects, cleans, normalizes and reports on offerings available under the JOBS Act. This data is transmitted to Bloomberg on a daily basis. They have worked in 43 countries helping governments and regulators create policy to enable startup and small business finance and job creation. Visit CCA’s website for additional information.

CONTACT: Sherwood Neiss  sherwood@theccagroup.com
Jason Best, jason@theccagroup.com

ABOUT SBE COUNCIL

SBE Council is nonpartisan advocacy, research and education organization dedicated to protecting small business and promoting entrepreneurship. For 25 years, SBE Council has worked on and advanced a range of private sector and public policy initiatives to strengthen the ecosystem for strong startup activity and small business growth. Visit www.sbecouncil.org for additional information. Twitter: @SBECouncil

CONTACT: Karen Kerrigankkerrigan@sbecouncil.org

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Monthly Funding Recap October 2020: Highest Amount Ever for Investments as SEC Increases Maximum Raise to $5M

Online investment funding in October 2020, the first month of the final quarter of the year, increased 33.2% over September and followed the strongest quarter for online investment, according to Crowdfund Capital Advisors. At the same time, 7 new $1,000,000+ offerings closed last month – this tied for the fourth highest monthly total, so far this fiscal year – indicating that despite a global pandemic and uncertainty around the U.S. presidential election, local investors were continuing to deploy records amounts of cash. This is all happening as the SEC voted to increase the maximum companies can raise online from $1,000,000 to $5,000,000.  This change will enable tens of thousands of additional companies to utilize Regulation Crowdfunding to raise capital to start or begin to recover and grow their businesses.
Subscribe to Bloomberg Data on SME fundraising in the US
This is the only place you can find complete data on all US Reg CF capital raises.
Key Findings

  • Online investment funding in October 2020 came in at $32 million, up 71.6 percent from October 2019.
  • 7 new “crowd unicorns” (defined as online investment issuers who raised in excess of $1 million online in a single offering from online investors) joined the board in October, this tied for the fourth highest month for the year. The enterprise value of these new crowd unicorns is $143,328,000.
  • New offerings were up (116 vs 97 in September) but not as strong as the month of July (130).

Online Investment Funding by Month through October 2020
Includes Regulation Crowdfunding and Parallel 506c Offerings

New Crowd Unicorns
There have been 70 crowd unicorns thus far in 2020.

  • In October, seven new crowd unicorns joined CCA’s list of startups that raised $1 million or more.
  • August had 11 crowd unicorns
  • July and September each had 9.
  • The most highly valued October crowd unicorns were:
    • San Diego-based Pacific Integrated Energy, a company creating new solar energy markets
    • This Way Global an Austin-based company that matches people with jobs;
    • Boston-based Beanstox, an app that makes investing easy; and
    • College Park, Maryland-based Airgility, a manufacturer of AI powered aerial robots for public safety, security and defense.

Interestingly enough, only 4.3% of all crowd unicorns in 2020 have come from Silicon Valley proving that online investing is democratizing access to capital by allowing investors all over the United States to invest in local businesses they believe in.  Together these October crowd unicorns have raised $8.2 million and added $143.3 million in valuation to the crowd unicorn board. The crowd unicorn board collectively has almost $1 billion in enterprise value.

7 New Crowd Unicorns in October 2020

Nationwide Online Investment
As of October 31, 2020, nationwide online investment totaled $179.7 million.

  • That was up 62.5% over the first 10 months of 2019, when investors spent $110.6 million.
  • The number of investors for the first 10 months of 2020 was 295,000 which was up 80% from 164,000 in 2019.
  • Average investment decreased 9.6% from $674 in 2019 to $609 in 2020 due to the increase in retail investors.

So, while the pandemic raged, online investment increased dramatically, the number of investors nearly doubled and issuers around the United States were able to find critical capital to help them during this time of crisis.

Rounds of $1 million and more represented 25.6 percent of invested dollars in October 2020 – lower than October 2019 at 32.9 percent – per CCA data. This means that more capital is going to more offerings that are raising less than $1 million in 2020. This would support the theory that more businesses are turning online for capital from local investors where the government stimulus programs have come up short. We’ve noted in other reports that local investors have been particularly active through the pandemic. Overall, $1 million-plus rounds have accounted for a slightly lower percentage of total funding this year, at 32.2 percent, than last year, when such megarounds represented 32.7 percent of funding.

Mega Valuations
During 2020 two companies leveraged online investing that had valuations in excess of $100 million. West Hollywood-based crowdfunding platform StartEngine raised $685k at a $190 million post-money valuation. This is their fourth Regulation Crowdfunding offering. Their first one, which closed on March 2019, had a $120 million post- money valuation. Their success shows their understanding of how to leverage online investors not only for themselves but others on their platform.  New York-based Fruit Street Health, a telemedicine service raised $41k at a $104 million post-money valuation.

Election slowdown won’t last
With the U.S. election looming, we saw a slowdown in funding in the first week of November. But, with the markets and liquidity up, we expect capital will still be deployed at a strong clip through the end of the year. From a funding perspective, October was also the strongest month for investments last year as well. With the proposed SEC changes that increase the amounts companies can raise online we only expect the number of firms raising money online and investors backing them to increase.

Q&A: CCA & SBE Council on the Main Street Co-Investment Fund

The following is a reprint of an article that appeared on Start Us Up.
The original can be found here.
Start Us Up/America’s New Business Plan was launched by the Ewing Marion Kauffman Foundation.
America’s New Business Plan is a bipartisan policy roadmap to support entrepreneurs, with recommendations for federal, state, and local government. The plan was developed to provide policymakers with research-based solutions to overcoming the problems faced by entrepreneurs that prohibit them from starting and growing their business. 

Crowdfund Capital Advisors and Small Business & Entrepreneurship Council, two members of the Start Us Up coalition, are championing the creation of a co-investment fund for successful Regulation Crowdfunding campaigns. We spoke with CCA’s Sherwood Neiss and SBE Council’s Karen Kerrigan to discuss how the fund, and crowdfunding in general, can transform the funding landscape for entrepreneurs.

Q: Tell us about the idea for a co-investment fund and what it might look like in the United States.

A: During the Great Recession, we developed the idea for securities-based crowdfunding because we needed to find a way to get capital flowing to America’s job creators. The banks weren’t lending, and other options entrepreneurs were using — like lines of credit and credit cards — disappeared. Since Regulation Crowdfunding went into effect, more than 2,750 companies in almost 1,000 cities across the United States have raised close to $700 million to support their growth and operations.

When COVID hit, something interesting happened. Rather than seeing Regulation Crowdfunding offerings diminish and investors shy away, the opposite happened. From February to July, we saw the number of offerings, investors and capital commitments hit historic highs. This got us thinking. If community investors can help support community businesses with their limited capital, what if we were to multiply the amount of capital by creating a co-investment fund whereby the government would invest alongside the crowd?

So, we looked to see where such a model already exists, and we found it in the United Kingdom with the Future Fund. This is what the Main Street Co-Investment Fund is based on. The fund would invest up to $250,000 per business in a dollar-for-dollar match provided a company were to hit a funding target and explain how they would use the capital.

The best part about this program is that it is turnkey. There is no policy that needs to be created. Right now, the Federal Reserve is sitting on about $598 billion that it was supposed to disperse to Main Street businesses. If the Fed were to just carve out $20 billion into this co-investment fund, it could support 80,000 businesses.

Q: What steps have your organizations taken to advocate for the creation of such a fund?

A: The first phase of our work has focused on reaching out and educating the committees of jurisdiction in the House and Senate about the Main Street Recovery Co-Investment Fund. In addition, we continue to deliver information and communications to key staff within the White House, Securities and Exchange Commission and Treasury about the value of this program to small business recovery, resiliency and entrepreneurship in general.

We continue to conduct various interviews with media, and have hosted a virtual Hill briefing about the fund. In mid-September we released the report “Regulation Crowdfunding by Congressional District: A Report Card,” which provides a comprehensive review of the success of investment crowdfunding. As noted in the report, this method of fundraising is widespread, with more than 90% of congressional districts — that is, 393 House districts — having issuers or small business owners that have utilized investment crowdfunding. In addition, there are more than 700,000 retail investors who have participated in these offerings.

Not surprisingly, the areas of the country that are being hardest hit by the pandemic in terms of business closures — urban districts — have tens of thousands of retail investors. Investment crowdfunding can be leveraged to help these hard-hit areas recover and reinvent themselves, but massive capital is needed. This is where the power of the local crowd can step in.

Q: Expanding access to capital is a key pillar of America’s New Business Plan. What potential do you see for Regulation Crowdfunding to help meet entrepreneurs’ capital needs, especially women, people of color, and those living in rural communities?

A: Before Regulation Crowdfunding came into existence, we testified that it would democratize access to capital, and indeed this method of raising capital has done just that. With more than four years of experience under our belts we can see that Regulation Crowdfunding is working. 80% of the capital is coming from investors within local communities.

Further research we have done shows that women and minority-founders are some of the biggest beneficiaries of Regulation Crowdfunding. This is important as much research has been done about how women and minorities are shut out of the traditional capital markets.

With the decimation of untold numbers of small businesses — perhaps in the millions — by the end of COVID, it is more critical than ever that policymakers focus on solutions that will fuel business creation and growth. By leveraging private capital, the government can play a key role in helping the economy recover from the COVID catastrophe.

For more information contact us.