Equity Crowdfunding at Year One, What’s The Impact?

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Forbes | Kay Koplovitz | Sep 26, 2014

Tracking Crowdfunding SuccessA total of 534 out of 3,361 companies successfully hit their equity crowdfunding target in year one, thank you Title II of the JOBS Act. According to Crowdnetic, $217.7 million equity capital was raised, which averages $407, 685 per company. Despite the 2, 824 that did not get funded, I see the one-year anniversary of the JOBS Act Title II provisions as a success—perhaps this is because of my rose colored entrepreneurial glasses, but $217.7 million capital raised is an indicator that publicly soliciting funds from accredited investors has created access to a new funding stream.

What Sectors Are Leading the Way?

The Services and Technology Sectors continue to lead in the amount of recorded capital commitments at $107. 4 million and $77.9 million respectively. They are followed by consumer goods, financial products and healthcare. According to Luan Cox, co-founder and CEO of Crowdnetic, investments made through crowdfunding platforms have grown each quarter and will continue to grow exponentially as more specialized platforms come to market. Crowdfunder, Founders Fund, CircleUp and Angel List are among the equity crowdfunding sites that function like Title II conduits to connect entrepreneurs and investors with the open source market.

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Equity Crowdfunding Results And Trends

Chance Barnett, Founder and CEO of Crowdfunder shared with me what the equity crowdfunding landscape looks like at Crowdfunder. Crowdfunder has seen 31 companies endure funding rounds within the first 9 months of operation. Crowdfunder’s average deal size is $1.6 million, most of them in the Seed and Series A rounds, and the range raised is generally $500,000 to $3 million.

Chance Barnett, also explained that equity crowdfunding is using online engagement as a tool for marketing and constructing a more compelling pitch that delivers a better product or service. Now that one year has passed since Title II implementation, he is noticing that people are no longer thinking about funding as separate from crowdfunding, but that crowdfunding online is becoming an integral part of the overall process of securing funding.

Where is Equity Crowdfunding Taking Place?

Equity crowdfunding is taken place in all 50 states, the District of Columbia and Puerto Rico. This represents a significant democratization of capital sources and is opening the door for investors living in the flyover states that have much less access to deal flow than the coastal states do.

With Silicon Valley at the helm, California continues to lead the way in both the number of companies and the capital raised. Rounding out the top five states in equity crowdfunding are: New York, Florida, Texas, and Illinois.

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As reported by Crowdfunder, there are an estimated 9 million accredited investors in the US, while the vast majority have not yet signed onto an equity funding platform, they are distributed throughout the country. People can now sign on, verify their accreditation, and see deals that others are investing in. Accredited investors can even tag along with well known VC’s for as little as $1,000, something that Chance says was unheard of even 3 years ago and not even possible until Title II of the JOBS Act.

Rewards-Based Crowdfunding and Equity Crowdfunding Are Finding Capital

People have invested hundreds of millions since reward-based crowdfunding sights launched. FundRazr, FuelLocal, Kickstarter and Indiegogo are example of rewards-based crowdfunding platforms that contribute capital to business growth. While not an equity crowdfunding site, Indiegogo is having a major impact for profit firms. I spoke with Indiegogo’s Co-Founder, Danae Ringelmann to gain a better understanding of how entrepreneurs are able to scale a business through reward-based crowdfunding in a way that appears similar to equity crowdfunding.

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The National Crowdfunding Association of Canada (NCFA Canada) is a cross-Canada crowdfunding hub providing education, advocacy and networking opportunities in the rapidly evolving crowdfunding industry. NCFA Canada is a community-based, membership-driven entity that was formed at the grass roots level to fill a national need in the market place.  Join our growing network of industry stakeholders, fundraisers and investors. Learn more About Us | Support Canadian Crowdfunding.

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