In a recent episode of the Capital Ideas podcast, hosts Nick Morgan, Dara Albright, and Mark Hiraide welcomed back Woodie Neiss, founder of Crowdfund Capital Advisors, a veteran investment crowdfunding expert and key figure in the origination of the JOBS Act.
Neiss, known for his comprehensive industry data collection, provided a critical analysis of the SEC’s recently released crowdfunding report (here), shedding light on its limitations while celebrating its effort to illuminate private capital markets. The discussion underscored the transformative potential of crowdfunding and the need for more granular data to capture its true impact.
SEC Report: A Step Forward, but Incomplete
Neiss began by commending the SEC for producing a report that highlights activity in investment crowdfunding, a sector that has democratized access to capital for entrepreneurs across 2,300 U.S. cities. “They didn’t have to do it,” Neiss noted, appreciating the SEC’s effort to analyze data from Form C and Form C-U filings, which issuers submit to report fundraising progress. However, he quickly pointed out a critical flaw: the report relies heavily on these filings, which suffer from “abysmal” compliance rates.
According to Neiss, the SEC’s dataset included 3,869 Form C-U filings, representing only 59% of the 6,564 successful offerings his database tracked as of December 31, 2024. This 41% gap in data led to significant underreporting, with the SEC estimating $1.3 billion raised by 3,790 companies, while Neiss’s data showed 6,500 companies raising $2.4 billion, plus an additional $314 million in parallel offerings. “How do you do medians or averages with a partial dataset?” Neiss questioned, emphasizing the need for a more complete picture to inform policy and investor decisions.
The Power of Real-Time Data
Neiss’s firm maintains a robust database that tracks every crowdfunding offering in real time, capturing details like valuations, founder demographics, and industry codes. Unlike the SEC, which depends on delayed filings, Neiss’s team monitors daily transaction velocity, investor sentiment, and issuer activity across thousands of offerings. This approach reveals trends invisible in static reports, such as geographic capital flows and the distinction between debt and equity raises. For instance, debt issuers, often Main Street businesses, seek smaller sums for modest needs, while equity issuers—typically startups—pursue larger, growth-driven rounds.
The discussion also highlighted the importance of segmenting data by company stage and revenue status. “You can’t just look at the entire dataset,” Neiss argued, noting that startups under three years old, often ineligible for bank loans, rely heavily on crowdfunding. His 210-page industry report, a stark contrast to the eight-page report from 2017, dives into these nuances, offering insights into issuer and investor sentiment amid macroeconomic uncertainties like tariffs and fluctuating interest rates.
Test-the-Waters and the Marketing Imperative
A significant portion of the conversation focused on the “Test the Waters” (TTW) campaigns required by many platforms, which screen issuers by gauging investor interest before a full offering. Mark Hiraide raised concerns that these campaigns may exclude promising issuers who fail to meet arbitrary thresholds, like $60,000 in pledged funds. Neiss acknowledged the issue but defended TTW as a tool that helps platforms ensure success (tied to their fee-based revenue) and guides issuers to refine their pitches.
“Crowdfunding is just technology applied to friends-and-family financing,” Neiss explained, stressing that issuers must build a “crowd” before launching. His research shows that 80% of crowdfunding investors have a first-degree connection to the entrepreneur, reinforcing the need for pre-existing networks.
Successful offerings, he noted, often secure 30% of their target within the first week, driven by early momentum that signals credibility to hesitant investors. “Nobody wants to be the first one on the dance floor,” he quipped, drawing a parallel to human psychology in investing.
Neiss also highlighted the rise of “InfluVestors”—social media influencers who invest in crowdfunding deals and promote them to their followers.
This trend, he predicts, will evolve the industry, making it less reliant on pre-built networks and more akin to a “fishing expedition” driven by viral marketing. He drew an analogy to Wall Street’s traditional roadshows, where investment bankers “sell” offerings, noting that crowdfunding requires similar marketing savvy, albeit through modern channels like TikTok or X.
Transparency and Low Fraud
The hosts praised the SEC’s small business policy staff for their flexibility in interpreting rules, particularly around pre-offering communications and social media use, which were not originally envisioned in the JOBS Act. Neiss emphasized the transparency built into crowdfunding, citing discussion sections on platforms where investors, including domain experts like doctors, ask probing questions that inform others. “Read the comment section,” he advised, noting its value for due diligence.
This transparency, combined with rigorous requirements like fraud and background checks, CPA reviews, and minimum funding targets, has kept fraud in crowdfunding “very small,” according to Hiraide. Neiss agreed, arguing that fraudsters seek quick schemes, not the laborious process of crowdfunding. “Who wants to spend all that time just to commit fraud?” he asked rhetorically.
Looking Ahead: Data-Driven Investing
Neiss shared a success story from his venture fund, D3VC, which leverages machine learning to identify promising crowdfunding deals. An early investment in SeedInvest yielded a 4,300% return after its parent company, Circle, went public. By analyzing daily signals like average check size and investor participation, Neiss’s team spots opportunities overlooked by traditional Wall Street metrics, which he criticized for being “rearview mirror” focused.
As the industry enters its “second inning,” Neiss remains optimistic about its potential to transform early-stage capital formation. However, he urged stakeholders to demand more comprehensive data to fully understand its impact. For now, his database offers a clearer lens than the SEC’s report, revealing a vibrant ecosystem that’s reshaping how entrepreneurs and investors connect.
Nick Morgan is President and Founder of ICAN, the Investor Choice Advocates Network, a nonprofit public interest litigation organization dedicated to serving as a legal advocate and voice for everyday investors and entrepreneurs. He was previously a partner in the Investigations and White Collar Defense Group at Paul Hastings law firm. Morgan previously served as Senior Trial Counsel in the SEC’s Division of Enforcement. Capital Ideas is a series created by Morgan and Dara Albright.