Why Equity Crowdfunding instead of traditional venture capital?

  • $214.9M raised in 2020 (105% growth from 2019) from 1035 new companies (91% growth from 2019)
  • 48 Reg CF companies that launched in 2020 raised the maximum $1.07M (assumes the maximum was met if they raised at least $1M)
  • 2020 saw over 358,000 investors in Reg CF, a 75% increase from 2019 according to a CCA press release

Notable News and Milestones for US Equity Crowdfunding

  • The US Securities and Exchange Commission (SEC) adopted amendments to the accredited investor definition, which allow certain professionals, certification holders, and others to qualify without having to meet the income and net worth requirements.
  • ​The SEC adopted final rules to update the exempt offering framework in the US, which will increase the Reg CF limit from $1.07M to $5M, increase investor limits, allow Testing the Waters, allow a new Special Purpose Vehicle (SPV) for crowdfunding offerings, and many other changes to Reg CF, Reg A, and Reg D.
  • ​StartEngine Secondary launched in Q4 2020, allowing trading of StartEngine’s own shares.

We are the First
We are the Largest

Online crowdfunding platforms allow entrepreneurs and companies to showcase their projects to a larger number of potential investors, as compared to conventional forms of capital raising.

Unlike the conventional forms of financing, such as venture capital, equity crowdfunding does not result in a dilution of power within a company. Although the number of shares is increased, the involvement of a large number of investors means that power is not concentrated around a particular group of shareholders.

2021 Predictions and Forecast

1. Reg CF would surpass $500M in total capital raised by 2021 ($150-200M in 2020 alone)
    CORRECT – equity crowdfunding (Reg CF) raised $214.9 million in 2020 (source: Kingscrowd.com), bringing the total amount raised by Reg CF since 2016 to over $514M.

2. Higher-quality deal flow due to updated SEC regulations
    CORRECT – SEC announced adoption of final rules in Q4 2020, and the number of VC firms, notable investors and media personalities (e.g. Mr. Wonderful), institutional backers, and others who continue to get involved continue to grow.

3. New industry innovations, such as passive index funds and Secondary Markets
    CORRECT – StartEngine Secondary launched, and the Republic Note raised $16 million to act as a way to give diversified exposure to the Republic portfolio companies.

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