2020 was a year of crisis for the country and the financial markets, but it was also the year that fully demonstrated that online finance delivers capital to diverse SMEs, across the country, while providing robust investor protections. Regulation Crowdfunding:

•  Democratizes access to capital for women and minority entrepreneurs:
  • According to a January 2021 survey of SMEs that successfully raised the maximum $1M from Regulation Crowdfunding:
    • 45.5% had female founders
    • 40.9% had minority founders
    • 100% said that they would have raised $5M if that amount would have been available to them.
  • As a point of comparison, according to an April, 2020 Securities and Exchange Commission Report (https://www.sec.gov/spotlight/sbcfac/sbcfac-learn-from-data.pdf)
    • • Black, latinx and middle-eastern founders  received just  5% of all VC investment
      • Women founders received just 13% of VC investments

• Distributes capital to local economies across the United States despite geographical biases from the Venture Capital industry.
• Provides local investors a legal structure to support the local entrepreneurs they believe in, with a limited amount of risk capital.
• And over the last 4 years, with appropriate investor protections, these investments have been made with no reported fraud.

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No other part of this market has such complete, longitudinal data that can deliver easy to use and comprehensive transparency to the Securities and Exchange Commission and FINRA as they conduct their oversight of the private capital markets.

Regulation Crowdfunding was one of the most bi-partisan pieces of legislation in the year it passed. It allows any startup or small business to raise up to $1.07M online from their customers, friends, family and followers. Key points about the data and this report:

• The data in this report consists of over 125 data points collected from disclosure documents from offerings that are filed with the SEC and listed on Online Investment Platforms.
• Each day this data is aggregated from over 50 Online Investment Platforms that are registered with the SEC.
• The data is cleaned, normalized and transmitted to Bloomberg daily for market analysis.
• We look at data from exempt offerings that take place under Regulation Crowdfunding and parallel Regulation Crowdfunding/506c (Accredited Investor crowdfunding).

The data in this report demonstrates that the industry has matured to a point where the market is ready to utilize the regulatory modifications that are scheduled to go into effect in March 2021. Over the last 4 years, investors, platforms and issuers appear to have followed the law and have developed scalable operational systems as well as transparency and accountability within the model. We believe that 2021 will be a year of growth and opportunity for the Online Investment Industry for the following reasons:

1. Local economies are struggling due to the global pandemic and access to traditional capital is still a top challenge, if not the top challenge, for small businesses.
2. Stimulus capital, if it in fact reaches the smallest businesses and economies across the nation, represents a bandaid and entrepreneurs need access to more sustainable capital which online investment/community finance provides.
3. Market awareness of the industry has reached a tipping point where over 90% of Congressional Districts across the United States have had at least one Regulation Crowdfunding offering.
4. There has been no reported fraud or systemic failure in the model.
5. As more fraud continues to pervade the public markets, and distrust in them increases, investors are looking to diversify modest amounts of capital into local businesses/entrepreneurs they believe in.
6. The SEC voted on and approved changes that go into effect in March 2021 that would increase the maximum issuers can raise from $1.07M to $5M. This additional “head room” in funding availability will attract more issuers and more mature/larger issuers that are able to raise and utilize up to $5M in capital.

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A few of the key highlights include:

• Offerings by all types of businesses in all 50 states and Puerto Rico  successfully raised more capital.
• Offerings were up 61% year over year.
• The number of new Issuers (SMEs) of all sizes increased 58% and raised more in 2020 than any prior year
• Local investors are deploying rational amounts of money into local businesses in areas outside of Venture Capital
• Regulation crowdfunding investments continues to grow at a compound annual growth rate of 88% with high unrealized returns 
• Demographics: 1,085 Cities, 447 industries, and 750,000 investors have engaged in Regulation Crowdfunding