While January was dismal, February delivered a bit of bounce in Reg CF activity, according to Crowdfund Capital Advisors (CCA). The improvement in February reverses a downward trend that started in October.
CCA reports that its Online Investment Index, which tracks the top 50 deals, rose 134 points over January. This is said to indicate that investor sentiment is strong for online deals.
“While a month does not make a trend, things looked good for Investment Crowdfunding in February. While deals, capital, and the number of investors increased over January. Capital and the number of Investors were down over the prior year. However, investor sentiment is ticking up, and average check sizes remain high. We are cautiously optimistic that this trend will continue.”
“Last February had the highest month of capital commitments for 2022. This year while the amount is 16.8% less ($50.1M), it is still at a level typically seen in 2021 before the geopolitical and macroeconomic events of 2022. This a positive sign that conditions may be improving.“
Like other reports have indicated, valuations are on the decline. The same is holding true for Reg CF issuers, according to CCA, as median valuations dropped from $18.5 million in January 2023 to $15 million in February.
CCA is correct that a month does not make a trend nor the year, and everyone has an opinion as to whether or not things will get worse and when the Fed will pivot. What we do know is that rapidly rising interest rates are starting to gain traction. Unfortunately, there is a lot of fiscal stimulus in the pipeline that is fighting the Fed.
The economic malaise will pass, but it remains a question of when.