Regulation Crowdfunding, or Reg CF, experienced a solid month during November. A total of 135 new issuers sought to raise money under the exemption, generating $55.2 million in investor commitments.
Crowdfund Capital Advisors (CCA) monthly update shares that November offerings increased from the previous month as October saw 115 issuers under Reg CF.
Regarding November, it is the 8th best month on record for money raised, representing a growth of 46.4% YoY and 5.3% MoM.
While the numbers improved in November, this sector of online capital formation witnessed a drop in investor activity, with 23,600 individual investments slightly below the 12-month average of 25.1K. At the same time, this is an increase of 71.5% YoY, indicating a YoY increase in investor sentiment but a drop of 30.8% over October.
The median valuations for companies raising money using Reg CF saw an increase, rising to $17 million – now at a record high.
During November, 23 platforms, funding portals, or broker-dealers, listed offering under Reg CF.
As was previously reported, Honeycomb, a bank replacement platform providing peer-to-peer loans, took the lead for the first time with 40 new deals; a 185% YoY and a 110% MoM increase. This is probably due to the challenging economic environment and the hesitance of banks to provide credit for smaller firms. By listing a debt offering on a platform, issuers can skip the bank approval process and raise money from their community and other interested investors.
Wefunder, a long-time leader in the Reg CF sector, came in second with 27 offerings, a slight decrease of 6.7% from October and a significant drop of 25% YoY.
Dealmaker, a broker-dealer providing online capital formation for the full stack of exemptions, saw its highest month on record for Reg CF investments.
Sherwood Neiss, Principal at Crowdfund Capital Advisors, said the Reg CF industry is impacted by global events and the overall economy.
“It’s fascinating to see how these macro factors subtly influence the dynamics of crowdfunding, underscoring the sector’s both interconnectedness and independence with global events,” said Neiss. “As 2023 draws to a close, we’re seeing a clear trend of increasing investor interest in crowdfunding, with total commitments set to surpass those of 2022, though they may fall short of the record highs of 2021. This reflects a growing confidence in the sector, despite the economic uncertainties of the past year. Looking ahead to 2024, as the economy begins to stabilize from the Federal Reserve’s efforts, we anticipate a resurgence of issuers entering the marketplace. This potential influx suggests a robust year ahead for crowdfunding, as it continues to establish itself as a key player in the financial landscape.”
CCA reports that Reg CF has injected over $6.4 billion into the domestic economy, creating around 447,000 new jobs with 7400 created in November alone. These metrics highlight the importance of enabling capital formation – something policymakers need to remember.