It’s time for a crowdfunding update. Regulation Crowdfunding closed out its second calendar year, and the folks at Crowdfund Capital Advisors (CCA) analyzed the data recently in a report for the S.E.C.
While still in its infancy, the investment crowdfunding market is growing at a fast clip and represents a viable capital-raising alternative for small and mid-sized businesses, conclude the authors, CCA founders Sherwood Neiss and Jason Best.
The data adds to the growing evidence that Regulation Crowdfunding is succeeding in getting capital to a broad range of entrepreneurs.
The following are highlights from the report, which looked at activity from May 16, 2016—when “Reg CF,’ a central provision of the 2012 JOBS Act, went into effect—through December 31, 2017. Under the exemption, businesses can raise up to $1,070,000 from individuals, including from unaccredited investors.
- The number of unique offerings increased 267% from 178 in 2016 to 481 in 2017 (as the authors note, given that the first calendar year reflected just 7.5 months, the growth rates are likely somewhat inflated).
- Proceeds increased 178% from $27.6 million in 2016 to $49.2 million in 2017. Total proceeds by the end of 2017 was $76.8 million
- The number of successful offerings increased 202% from 99 in 2016 to 200 in 2017
- The average success rate of offerings to date is 66.7%
- The total number of investors in Regulation Crowdfunding increased 158% from 28,180 in 2016 to 44,433 in 2017
- Issuers that filed annual reports and reported creating jobs created on average 13.9 jobs.
- Revenues for issuers that filed annual reports increased on average 131% between the year in which they leveraged Regulation Crowdfunding and the prior fiscal year.
California claimed the lion’s share of offerings—about a third—followed by New York, Florida, Texas and Illinois. But companies in nearly all 50 states had offerings, with the exception of Montana, North Dakota, Nebraska, Kansas and Iowa. Issuers favored equity and SAFEs (simple agreements for future equity), followed by debt. Last year also saw the first Initial Coin Offerings (ICOs), a trend we’ll see more of in 2018.
Neiss and Best note that, given Regulation CF’s ability to help small businesses grow and create jobs, it should be promoted by government agencies focused on such issues, including local chambers of commerce and the Small Business Administration. To date, support for the regulation, and even awareness, has been low among many government agencies.
Read the full report here.