In November 2023, the investment crowdfunding landscape continued to demonstrate resilience amidst a complex mix of global and domestic events.
Market Dynamics – The Backdrop
The global stage in November was dominated by the war in Gaza, which, being regional in nature, did not significantly disrupt the markets. In contrast, the ongoing conflict in Ukraine continued to cause volatility due to its impact on global food supply and OPEC continues to try to raise energy costs.
The Federal Reserve held interest rates steady, with core inflation showing more stabilization, boosting market confidence. However, future rate hikes were not ruled out. The market is now anticipating a possible interest rate reduction heading into 2024.
Despite strikes, the economy remained resilient, although job growth slowed and unemployment claims reached their highest level since late 2021. Most companies reported year-over-year growth in earnings, but sales of new and existing homes retreated, primarily due to lack of inventory and rising mortgage rates. The Dow hit a new high for the year as investor confidence in a soft-landing becomes more of a reality.
Investment crowdfunding saw another strong month in terms of capital, a growth in issuer sentiment and a retraction in checks written although they remain high.
Issuers/Deals
November saw 135 new issuers, an increase from October’s 115 but a decrease from 143 in the previous year. Year-to-date, there were 1,328 new deals, indicating a slight downtrend in issuer sentiment compared to last year. Cities like Philadelphia, Denver, Sheridan, WY, and Kansas City, MO, saw a YTD increase in offerings, while major hubs like NYC, San Francisco, and LA experienced significant drops. The industry saw a rise in CleanTech, HealthTech, Entertainment, and Restaurant deals, with a corresponding drop in Software, Finance, and Household/Personal Products.
Capital
November continued to showcase the robustness of the investment crowdfunding sector, with investments remaining strong despite volatile geopolitical events and the Fed’s actions. The month concluded with an impressive $55.2M in commitments, making it the 8th best month on record. This represents a growth of 46.4% YoY and 5.3% MoM.
Investors/Checks Written
November witnessed a drop in investor activity, with 23.6K checks written. However, this is up 71.5% YoY indicating YoY increase in investor sentiment but a drop of 30.8% over October. November’s checks were only slightly below the 12-month average of 25.1K.
Valuations
November’s valuation trends reflect a similar trend to what early-stage venture issuers are experiencing. The median valuations across the board saw an increase, rising to $17M.
Platform Performance
November had 23 platforms facilitating offerings, indicating a diverse and competitive landscape but much less than the total number of platforms registered with the SEC. For the first time, Honeycomb, a debt-platform, took the lead with 40 new deals; a 185% YoY and a 110% MoM growth. A sign that bank financing is becoming more challenging for small businesses and they are turning online for capital. Wefunder came in second with 27 offerings, a slight decrease of 6.7% from October and a significant drop of 25% YoY. Noticeably, Dealmaker, a broker-dealer in the industry saw its highest month on record for investment crowdfunding investments.
Conclusion
The investment crowdfunding sector continues to play a pivotal role in the economy. Collectively, issuers are injecting more than $6.4B annually into local economies. The issuers that launched in November alone supported 7,400 jobs, bringing the cumulative total of jobs supported since the industry’s inception to over 447,000.
“”November’s crowdfunding landscape reflects a nuanced interplay with geopolitical and macroeconomic events” said Sherwood Neiss, Principal at Crowdfund Capital Advisors. “While the regional conflict in Gaza didn’t significantly disrupt the markets, the ongoing situation in Ukraine continues to inject volatility. This backdrop, combined with the Federal Reserve’s cautious stance on interest rates and the resilient yet cautious job market, has shaped investor and issuer sentiment in complex ways. It’s fascinating to see how these macro factors subtly influence the dynamics of crowdfunding, underscoring the sector’s both interconnectedness and independece with global events.”
“As 2023 draws to a close, we’re seeing a clear trend of increasing investor interest in crowdfunding, with total commitments set to surpass those of 2022, though they may fall short of the record highs of 2021. This reflects a growing confidence in the sector, despite the economic uncertainties of the past year. Looking ahead to 2024, as the economy begins to stabilize from the Federal Reserve’s efforts, we anticipate a resurgence of issuers entering the marketplace. This potential influx suggests a robust year ahead for crowdfunding, as it continues to establish itself as a key player in the financial landscape.”
Stay tuned to Crowdfund Capital Advisors for the latest updates and analysis on the ever-evolving world of Investment Crowdfunding.
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