Wefunder was the top platform for Reg CF [Regulation Crowdfunding] offerings during 2023, according to data provided by KingsCrowd.
Reg CF is a securities exemption that allows for online capital formation. A notice filing and other documentation is required under the exemption, which is open to both non-accredited and accredited investors. In 2021, the Reg CF funding cap was increased from $1.07 million to $5 million, making the exemption more appealing for smaller firms.
In total, Reg CF generated $420 million, a slight decline from the $423 million generated in 2022 (0.7%), according to the report.
Since 2018, $1.7 billion has been raised using the Reg CF securities exemption, with 92% of the offerings filing for SAFEs, equity, or convertibles. Just 8% of issuers raise money using debt or revenue sharing securities.
Wefunder was the top platform, raising $132 million for companies in 2023. Wefunder was followed by StartEngine in second place which raised $117 million. In total, the two platforms account for 59% of all funding under Reg CF. DealMaker, Republic, and Equifund rounded out the top five platforms for Reg CF issuers.
The majority of offerings under the exemption are dominated by a handful of funding portals and broker-dealers. At the same time, there are dozens of funding portals that generate little activity in the sector of finance.
Issuers numbered 1434 during 2023, with 79% (1157) successfully funding and 314 companies failing to raise the minimum amount (21%).
The average funding round under Reg CF was $366,000 with a time period of about four months.
Just 11 companies raised the maximum allowable amount under Reg CF ($5 million).
The report states that companies using Reg A raised just $223 million in 2023. This is said to exclude Real Estate offerings and fractional investments. This is a decline from 2022, when issuers raised $391 million under Reg A+. While issuers may raise up to $75 million under Reg A+, this exemption must be qualified by the SEC a process that can be time consumer, perhaps up to 6 months, thus pushing some firms to pursue a Reg D offering instead.
The report states that Reg CF investments bottomed in Q3-Q4 of 2022 and have been recovering since Q1 of 2023.
Expectations are that markets should rebound with forthcoming interest rate cuts, helping to fuel a recovery in venture capital markets.