Welcome to the Q2 edition of our Investment Crowdfunding Newsletter! In this month’s issue, we delve into the ongoing debate among experts about the possibility of a recession in the United States and its potential impact on equity crowdfunding. Despite concerns surrounding higher borrowing costs and interest rate hikes, the economy has shown resilience, with consumers continuing to spend and employers maintaining robust hiring trends. As we explore the results of Q2’s investment crowdfunding campaigns, we’ll analyze how these economic factors have influenced the landscape and contributed to the success stories within the crowdfunding realm.
According to a comprehensive analysis of offers, investments, and checks written data, Q2 2023 exhibited steady growth, albeit with a slight decrease in new deals compared to the previous quarter. The number of new deals stood at 355, indicating a consistent rise in opportunities. Total commitments from investments amounted to $151.7 million, with an impressive count of 99,388 investors.
Sherwood Neiss, Principal at CCA. said, “As we analyze the quarterly findings, we witness a resilient market showing steady growth in Q2 2023. While there may have been a slight dip in deal flow compared to the previous quarter, it is important to acknowledge the overall upward trend in offers, investments, and checks written. These findings reflect the ongoing strength and potential of the market, underpinning the positive outlook for investors and entrepreneurs alike.”
Issuers/Deals
- In Q2, a remarkable 403 deals were closed, marking the second-highest number since the industry’s inception.
- The number of new issuers declined compared to the previous quarter and year, yet still ranked as the 10th best quarter.
- 3 out of 4 deals successfully met their minimum funding targets, a slight improvement from the previous quarter.
- The average time on the market was 43 days, indicating favorable market dynamics.
- The total number of deals surpassed 7,200, showcasing robust deal flow and sustained interest.
- Post-revenue companies coming online outpaced pre-revenue ones at a ratio of 1.64 to 1, with significantly higher capital commitments flowing into the former.
Capital
- Q2 2023 emerged as the second-best
- investment quarter, with only $72 million away from breaking the $2 billion milestone.
- Issuers experienced an upward trend in average raises, with debt raises witnessing a significant jump.
- Notably, there were 45 deals surpassing the $1 million mark, a substantial increase from the previous quarter.
Investors/Checks Written
- Investor sentiment remained robust as the number of checks written increased compared to the previous quarter.
- Although check sizes decreased slightly from the previous quarter ($1,545 vs. $1,693), they have shown an overall upward trend.
Valuations
- Established post-revenue issuers showcased steady median valuation growth, maintaining their high valuation range since the industry’s inception.
- Conversely, post-revenue startups, pre-revenue established issuers, and pre-revenue startups experienced valuation drops, signaling potential market corrections.
Jobs/Economic Activity
- The industry’s significant contribution to local economies was evident; new issuers in 210 cities accounted for the highest economic stimulus since the launch of the industry.
- Job creation and support during the quarter increased to 27.6K, bringing the total jobs created/supported to 336K since the industry’s inception.
Platforms
- Wefunder secured the top spot as the leading platform, raising an impressive $80.8 million through 316 new offers.
- StartEngine and Republic followed, raising $28.4 million and $13.4 million, respectively, with a significant number of new offers.
Debt Deals:
- The debt market experienced its most successful quarter to date, with 113 new offers, signaling a tightening commercial lending market.
- Interest rates on debt offers increased to nearly 11%, reflecting the impact of the Federal Reserve’s interest rate hike.
- Revenue Share, a popular debt security option, witnessed a surge in the number of issuers utilizing it, with an average revenue share of 1.6.
Women/Minorities:
- In June, 30% of all deals had a women or minority founder, and all of those deals were successfully funded.
- However, capital allocation to women and minority founders remained relatively low, representing only 5% of the total funds committed.
- Notable variations were observed in the average funds raised, with minority women securing the highest average amount.
In summary, the findings from Q2 2023 affirm the resilience and evolution of the alternative finance landscape. Despite minor fluctuations in certain metrics, the industry continues to showcase growth, create jobs, and attract investor interest. It would appear that the overall economic resilience is showing up as positive investor sentiment when it comes to Investment Crowdfunding. Issuers need to be made aware and efforts to promote diversity and support underrepresented founders remain crucial for a more inclusive and thriving ecosystem.
