Getting In Early: SEC Sees Growth In Equity Crowdfunding

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Financial Advisor | Nov 20, 2019

early stage capital - Getting In Early: SEC Sees Growth In Equity CrowdfundingLike the small businesses it was designed to help, equity crowdfunding is still in its start-up stage. But the U.S. Securities and Exchange Commission reports that it’s rapidly growing into a viable source of financing – and a new investment option for those who want to own a piece of an early-stage company.

Equity crowdfunding allows investors to become part owners of companies by trading their investment for shares of private stock. As with traditional crowdfunding, investments usually take place through a funding portal like Kickstarter, StartEngine or Republic. Investments may also be made through a broker-dealer’s online platform.

There are 45 such portals registered with the Financial Industry Regulatory Authority (FINRA), according to the SEC, but the top three account for about two-thirds of all offerings and proceeds raised. Wealthforge lists Reality Mogul, AngelList and FundersClub as the top three platforms.

RegCF SEC update Jun 2019 1 - Getting In Early: SEC Sees Growth In Equity Crowdfunding

Signs Of Success

While equity crowdfunding is still relatively small, it’s showing signs of success. Companies such as Beta Bionics, which is developing a bionic pancreas, and craft beer company Hopsters Brewery each raised $1 million in crowdfunding campaigns. Beta Bionics recently raised $63 million through Series B equity financing.

In fact, a majority of crowdfunding campaigns have been successful, according to a new analysis by the SEC, which found that the success rate for crowdfunding companies increased from 58.9% in 2017 to 63.9% in 2018.

The SEC estimates that 1,351 offerings took place between May 16, 2016 and December 31, 2018. Offerings that were completed raised an average of $208,300 and a total of $107.9 million. The number of investors participating in successful offerings increased from 77,558 in 2017 to 147,448 in 2018.

While the U.S. market for equity crowdfunding is still small, globally equity crowdfunding has raised $2.5 billion, according to Startups.com.

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US Offerings by Stage

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Types of offerings

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The potential

RegCF SEC update Jun 2019 2 - Getting In Early: SEC Sees Growth In Equity Crowdfunding

Download the 59pg PDF SEC report:  'Regulation Crowdfunding - Report to the Commission (June 2019)

 


NCFA Jan 2018 resize - Getting In Early: SEC Sees Growth In Equity 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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