The Impact of Equity Crowdfunding


Because of Title II of the JOBS Act, about 1 in 7 companies who attempted equity crowdfunding in the last year were able to hit their target in year one. Overall, this equaled more than $200 million I equity capital, making the provisions of Title II successful in many ways. Sure – 6 out of 7 companies didn’t get the successes they wanted, but with that level of capital, it means that public funding from accredited investors is off to a good start.

Who Is Finding the Most Success?

It’s the technology and services sectors that are leading the way in equity crowdfunding. The services field accounted for 50% of the total amount of equity raised. Health care, financial products and consumer goods rounded out the Top 5. As more equity crowdfunding sites are able to come online and begin exploring niches within each industry, the numbers are only going to start getting better and better.

What is becoming more prevalent in the business approach to equity crowdfunding is that it isn’t being seen as a separate capital entity. Because a minimum of $400k is being raised per successful company, it has become part of the overall process of securing funding when equity is needed. It’s been a change of thought that is remarkable for just one year and that holds great promise for companies that may attempt equity crowdfunding in the second year it is available.

How Prevalent Is Equity Crowdfunding Today?

Equity crowdfunding has taken place in all 50 states. There have also been companies in DC and in Puerto Rico who have attempted fundraising in this method. It means that there are more open resources available to businesses and investors in the Heartland are able to reach coastal cash that normally wouldn’t be available to them.

California led the way in total equity crowdfunding in the first year. New York and Florida were in the Top 3 as well. Silicon Valley led the way, but here’s the exciting part – the vast majority of the 9 million accredited investors in the United States have not signed onto a crowdfunding platform as of you. Since it only takes $1,000 to tag along with VC’s on crowdfunding platforms after accreditation is verified, the funding levels that are achieved in the coming year are likely to be astronomical.

That doesn’t include the 180 million people who aren’t accredited investors, but are active on websites like Indiegogo and Kickstarter on a regular basis for rewards-based equity crowdfunding. The market was virtually untapped until the release of Title III of the JOBS Act. Because of the successes that have been seen so far, there could be a major wave of cash just waiting for new businesses in the next year. Only time will tell.