Decentralized Venture Ecosystem

3 Trends in 2022 Predicted to Shape Investment Crowdfunding

Crowdfund Insider | | Nov 1, 2021

crystal ball - 3 Trends in 2022 Predicted to Shape Investment CrowdfundingInvestment crowdfunding took off when the JOBS Act regulation went into effect back in 2016 and has become a booming industry in short order. We saw some significant regulatory changes in March of this year, with the Securities and Exchange Commission (SEC) confirming capital formation increases for Reg A+ and Reg CF. These increases solidified just how impactful this type of crowdfunding can be.

Equity crowdfunding has garnered trust and legitimacy from issuers, investors, broker-dealers, transfer agents, and lawyers—and raised $239 million via Reg CF and $1.6 billion via Reg A+ in the first half of 2021. Today, there’s nearly $800 million invested across 64 FINRA-licensed Reg CF funding portals.

Significant, positive economic ripple effects from equity crowdfunding

When it comes down to it, what 2020 and 2021 have clearly shown us is that investors want to participate in and support small businesses.

See:  Doug Ellenoff on US Reg CF Increasing Issuer Caps to $5 million: Investment Crowdfunding Will Challenge Traditional Venture Capital

At my firm, we’ve seen 4,000+ issuers to date, including startups, small businesses, and medium-sized businesses. These SMEs are choosing equity crowdfunding instead of traditional, bank-led financing because they can control their offering and financing needs. No longer beholden to the mercy of a single small business banker with specific credit appetites, or a venture capital firm with narrow funding parameters, these entrepreneurs are now in the driver’s seat and their customers and supporters are riding shotgun alongside them.

Currently, the top five industries for issuers are software, distilleries and breweries, restaurants, internet and e-commerce, and movies, according to research from Crowdfund Capital Advisors. Ironically, all industries are significantly impacted by COVID. But investors in these spaces are eager to participate in crowdfunding for their favorite businesses, and in 2020 venture capital was particularly difficult to come by. The world watched as so many of our favorite restaurants, venues, and small businesses closed because they didn’t have the financial ability to stay afloat. But equity crowdfunding presents a chance for those businesses to get back in the game.

As we forge ahead into 2022, the impact of equity crowdfunding for COVID-affected small businesses will play out with positive ramifications in local economies by creating not only capital for businesses, but creating jobs as well.  120,000 local jobs have been created so far in 2021 as a result of successful Reg CF offerings, reported Crowdfund Capital Advisors. These salaries support government taxes, consumer spending, savings, and more. They’re supporting our communities and keeping food on our neighbors’ tables.

See:  Reg CF: Investment Crowdfunding Tops $1 Billion on Heals of Funding Cap Increase

Accessible crowdfunding for all

As we move into 2022, the equity crowdfunding industry will continue to build a foundation for underserved people to gain access to the financial system in terms of meaningful investments. Anyone—regardless of social status or annual income—should be able to begin investing in companies that hold meaning for them. It’s about radical accessibility and execution. Looking to the future, we’re building a system that allows for more equal access for both the issuer and the investor.

Whereas only 1.2 percent of the venture capital invested in U.S. startups in H1 2021 went to Black founders, and just 2.3 percent to women in 2020, women and people of color make up 40 percent of issuers using Reg CF.

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NCFA Jan 2018 resize - 3 Trends in 2022 Predicted to Shape Investment Crowdfunding The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org

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