As venture capital (VC) firms face declining investor interest, leading to concerns over inactive “zombie funds,” investment crowdfunding tells a different story. While both sectors have experienced reductions in investor numbers, Reg CF continues to show resilience, maintaining broader participation compared to venture capital, despite a sharp drop in investors between 2023 and 2024.
Investor Participation: A 30.4% Drop from 2023 to 2024, but Still Dominating VC
In recent years, investment crowdfunding has seen a significant decline in the number of active investors. From 2023 to 2024, Reg CF is expected to experience a 30.4% drop in investors, falling from 316,608 to an estimated 220,404. This sharp decline mirrors the 25% decrease reported in VC participation in recent years, but there’s an important nuance: even with this steep drop, investment crowdfunding remains far more accessible and attracts significantly more investors than venture capital.
In fact, throughout the observed period, Reg CF investor numbers have consistently outpaced VC investors. For instance, in 2021, the number of Reg CF investors was 2,137% higher than VC investors on Pitchbook, and even in 2024, Reg CF still boasts a 1,929% higher investor base than VC. It’s worth noting that Reg CF only launched in May 2016, so its percentage increase would have been even more substantial had it been a full year. This difference highlights a key advantage of Reg CF: its accessibility. Reg CF investors are often friends, family, and customers of the businesses, making it easier to connect with them and engage their support. In contrast, VC investors are notoriously difficult to find, and securing their commitment requires navigating rigorous screening processes and multiple rounds of engagement.
Capital Inflows: Investment Crowdfunding Remains Resilient
Despite the 30.4% decline in investor numbers between 2023 and 2024, the amount of capital raised through Reg CF platforms has remained robust. From just $19.71M in 2016, investment crowdfunding surged to $556.90M in 2021. Although there was a dip in 2022, with $498.24M raised, the market bounced back in 2023 to $526.52M. Looking forward to 2024, projections show capital inflows remaining strong at $540.06M.
This trend is striking when compared to VC, where investor numbers have also fallen significantly, and capital raised has seen greater volatility. Investment crowdfunding, on the other hand, has proven to be more resilient and inclusive, offering an avenue for startups to continue raising funds despite broader market challenges. Moreover, the current lack of VC investors is creating an opportunity for Reg CF investors to get in on deals where valuations have been reset and traditional capital sources are pulling back. This opens the door for retail investors to access promising companies at more attractive valuations, which could prove to be highly beneficial in the long run.
Conclusion: Investment Crowdfunding Still a Vital Option with Long-Term Potential
While the number of Reg CF investors is expected to drop by 30.4% from 2023 to 2024, investment crowdfunding continues to be a critical funding tool for startups and small businesses. The capital raised through these platforms remains strong, showing that while fewer investors may be participating, those that do are contributing meaningfully. With its democratized approach, Reg CF offers a compelling alternative to venture capital, which remains heavily reliant on fewer, larger investors.
Furthermore, the ongoing valuation resets and absence of traditional VC capital provide a unique window of opportunity for Reg CF investors. Though it’s a game of risk, the potential upside for those who take part in these investment rounds could be substantial when these companies reach an exit.
* The data in this report comes from CCLEAR, the industry’s only 100% complete dataset of all investment crowdfunding transactions that began when the industry launched on May 16, 2016. For more information, see cclear.ai or contact data@theccagroup.com
