Shortage of Ideas Dims Launch of Equity Crowdfunding in the US
While the United States is known, worldwide, as the home of disruptive ideas, few entrepreneurs are taking advantage of the new equity crowdfunding laws. In May of this year, the SEC finalized the rules associated with Title III of the JOBS Act, which now allows online fundraising platforms to facilitate micro investments into startups via the web. What makes Title III special is that it enables anyone–not just accredited investors–to make investments into startups (generally considered an especially risky asset class). While our online education company, Eazl, has seen massive interest in the free Equity Crowdfunding 101 video course that we offer, entrepreneurs seem to be hesitating to take the leap into raising funds via equity crowdfunding. However, the equity crowdfunding world is seeing some green shoots.
People Love Boozy Projects
My friend Woodie Neiss at Crowdfund Capital Advisors collected some data on the first quarter that equity crowdfunding has been live in the United States, and they’ve found that only 82 startups filed paperwork with the SEC to enable them to raise funds using the new tools legalized by Title III. For those 82 projects, a total of $7.2mm has been committed with the average capital commitment by an individual backer at $810. Interestingly, while there were only 9 alcohol-related startups that raised money with Title III this summer, these projects raised over $2mm–more than any other industry. Personally, I invested in Voodoo Spirits, a company led by Jake Muhleman that makes and imports a popular, exotic spirit from Benin.
California, Texas, and Massachusetts Way Ahead
People from three states–California, Texas, and Massachusetts— have invested far more than those from any other states. Californians committed nearly $2.7mm to Title III projects this summer while Texans and Bay Staters committed $1.8 and $1.2mm, respectively. After these three states, Ohioans were next at $360k. Californians, by far, posted the most projects for funding, followed by New Yorkers.
Single Fundraising Community is Dominating the Marketplace
For business nerds, perhaps the most interesting news about equity crowdfunding is that a single platform, WeFunder, is dominating the market. WeFunder reported that 91% of the Title III the investors who have backed successful projects this summer did so on WeFunder. In a far distant 2nd place, NextSeed received 5% of the successful investments.
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