The quality of securities issued under Reg CF largely depends on the perception of the investor. One person’s belief that a security offering is going to the moon can be mirrored by another who sees it as a dog. Big-name venture capitalists mostly get it wrong when backing private firms, but then that is how a market economy works.
Crowdfund Capital Advisors (CCA) has announced a new service aiming to benchmark securities offerings issued under Reg CF [Regulation Crowdfunding]. An issuer must file a notice statement, along with information on the operations of the company, before it can raise money online. CCA is trying to clear up some of the confusion of value and worth with the launch of Capital Pulse Ratings – a system to rate these offerings using “data-driven insights.” CCA says they are “merging traditional analysis with investor sentiment.”
To quote CCA Principle, Sherwood Neiss
“CapitalPulse Ratings offers an intricate look at the investment landscape, merging traditional venture analysis—such as company performance and industry benchmarks—with groundbreaking insight into investor sentiment. CapitalPulse Ratings consider the tried-and-true metrics that angels and venture capitalists rely on, then enhance this with real-time data on how much and how quickly investors are backing these companies. This dual approach gives a 360-degree view of a company’s true investment potential.”
Quantitative metrics include factors like cash on hand, receivables, long-term and short-term debt, how many investors and how it compares to peers.
CCA has created five specific tiers of measurement:
- Rapid Raiser: Companies with swift capital inflow, showing strong investor confidence.
- Steady Climber: Companies demonstrating consistent growth in investor interest.
- Emerging Contender: Companies with unfulfilled potential but showing promise.
- Potential Unlocker: Companies with latent potential yet to be realized.
- Emerging Opportunity: Companies whose value may not be immediately evident from current data.
Whether you are investing in private or public markets, there is always risk involved. Early stage firms tend to be riskier investments but also may generate larger returns over time when compared to established firms. In the end, it is the responsibility of each investor to determine how much risk they can shoulder and whether an investment is right for them. CCA is providing another tool to help you make a decision that can only be measured over an extended time period.
