Regulation Crowdfunding is a little over a year old and the data indicates that it is a revenue and income generator for companies and a jobs engine for the economy. The law requires companies that complete successful campaigns to file an Annual Report with the Securities and Exchange Commission (SEC) and also make it available to investors. 53 companies that were successful with their offerings by December 31, 2016 filed this form (C-AR) with the SEC. When comparing financial data from companies before vs. after crowdfunding campaigns, it is very clear that companies experienced increases in revenue, net income, and jobs, following a funding campaign.
Here are 3 very important findings:
- Companies that used Regulation Crowdfunding doubled their revenue growth compared with the year before their crowdfunding campaign
- Net income grew by 157% over the same period
- On average, companies added 2.7 employees after crowdfunding. Not everyone created jobs. 13 companies reduced workforce, while another 13-increased workforce. If you remove the 13 that reduced their workforce the average increases from 2.7 to 5.7
As Congress looks for ways to stimulate the economy, considering ways to expand utilization of Regulation Crowdfunding may be worth exploring.As Congress looks for ways to stimulate the economy expanding #Crowdfunding may be worth exploringClick To Tweet
When Regulation Crowdfunding kicked off on May 16, 2016 we launched the Crowdfunding Transparency Database. This database collects information about every company that files an offering document with the Securities and Exchange Commission (SEC). For each offering we collect over 80 individual data points that range from information about the financial condition of a company, to the composition of the founding team, to the size of a company’s social network among many other important data elements. We analyze campaigns based on those that both hit their funding targets and those that fail. We look at valuations across geography and industry and we analyze the impact that the crowd’s money has on a company’s performance. We track this information and report it both on our Daily Index page and via quarterly webinars and presentations at the SEC.
Regulation Crowdfunding allows any American startup or small business to raise up to $1,070,000 million from potential investors on debt and equity crowdfunding platforms registered with the SEC. Similar to donation or rewards sites, Regulation Crowdfunding issuers launch campaigns and use their social network to invite people to review their business plans, market opportunity, financial statements and video pitch. However, instead of getting a token of appreciation or a widget, backers get shares in a business or interest repaid on a loan.
From the launch of Regulation Crowdfunding on May 16, 2016 to June 30, 2017, 399 companies filed with the SEC. Of those companies, 52% were successful in hitting their minimum funding target and $37M was funded to those companies. With the average campaign lasting only 103 days, compared to the many lengthy and cumbersome alternatives like applying for an SBA loan or seeking VC money, Regulation Crowdfunding seems to be a viable alternative given its high success rate over a shorter period of time.Access to capital is the number one evergreen issue for startups and small businesses #CrowdfundingClick To Tweet
Access to capital is the number one evergreen issue for startups and small businesses. If the data from Regulation Crowdfunding now proves that it helps grow enterprises and create jobs, both of which lead to taxable revenue for our government, shouldn’t more emphasis be placed on it by the government, our small business associations, local chambers of commerce, educators and the media? It seems like a solution is right under our noses yet no one seems to know it yet.
Jason Best is co-founder and Principal of Crowdfund Capital Advisors (CCA), Jason Best co-authored the crowdfund investing framework used in the JOBS Act to legalize equity and debt-based crowdfunding in the USA. He has provided congressional testimony on crowdfunding and was honored to attend the White House ceremony when President Obama signed the JOBS Act into law on April 5, 2012. Jason co-founded the crowdfunding industry trade group that works with the Securities and Exchange Commission and FINRA as they create the rules for crowdfund investing. Jason also works with angel groups, PE/VC firms as well as governments and NGOs, including The World Bank, to understand the crowdfunding ecosystem and create successful crowdfund investing strategies. He was instrumental in the successful effort to have CCA selected by the US State Department’s Global Entrepreneurship Program as a Key Partner.
Sherwood “Woodie” Neiss, is co-founder and Principal of Crowdfund Capital Advisors, is an expert at building successful businesses. As a 3-time INC500 winner whose company won E&Y’s Entrepreneur of the Year, Sherwood understands the keys to entrepreneurial success from concept to company to sale. As a serial entrepreneur and investor during the credit crunch, Sherwood saw a need for a change in outdated securities laws and did something about it—as a co-founding member of Startup Exemption, Sherwood co-authored the Crowdfunding Framework used in the JOBS Act that was signed into law by President Obama on April 5, 2012. Within Crowdfund Capital Advisors (CCA), Sherwood works with clients ranging from governments and banks that are looking for ways to boost economic development in their countries to investment firms looking for access to increased deal flow that crowdfunding creates. Sherwood serves as an advisor to several crowdfunding platforms and crowdfunding technologies giving him a unique understanding and view of the industry and market. As an industry leader, Sherwood contributes to several publications including VentureBeat and TechCrunch. He additionally wrote Crowdfund Investing for Dummies through Wiley & Son’s.