U.S. Equity Crowdfunding Activity 2007-2012

statisticsEquityNet published today a free crowdfunding industry report containing statistics and trends based on U.S. businesses that used EquityNet from 2007 to 2012 to seek equity-based crowdfunding from accredited Reg D investors. Presented in the form of an embeddable infographic, the report presents some of the first statistics available on the original form of equity crowdfunding that involves the use of funding platforms such as EquityNet by accredited investors. It provides insight into how crowdfunding will appear under the deregulating provisions of the U.S. JOBS Act in which millions of non-accredited investors will be able to invest in privately-held businesses.

In introducing the report, Judd Hollas , EquityNet’s founder and CEO, said that the crowdfunding industry is hungry for “more data and less rhetoric.” “We are in the unique position of having 6 years of granular data from our patented platform and prepared this report to provide a statistical industry perspective for investors, entrepreneurs, policymakers, service providers, and others in the crowdfunding ecosystem. Although some high-level information has been available, the trends and statistics that emerge from this report present valuable new insights into the emerging crowdfunding industry.”

The new report contains business composition statistics and trends for many important attributes and even demonstrates the effects of the recession. For example, the average amount of capital being sought by entrepreneurs has varied greatly since EquityNet launched its platform in 2007. In 2008 the average capital sought was $2.5 million and dropped to an average of $800,000 by 2010. The economic downturn also left its mark on companies’ average pre-investment valuation, which fell from $6 million in 2008 down to nearly $3 million by 2010. Both of those metrics strengthened along with the economy by 2012.

Among other statistics presented and analyzed in the report are:

Consumer and business product/service companies account for over 40% of equity crowdfunding activity. These are industries that were previously underserved by traditional venture capital.
Around 50% of businesses that use equity crowdfunding seek less than $500,000 in investment capital.
Valuations vary widely in equity crowdfunding with around 40% of pre-money valuations being under $1,000,000.
Approximately 70% of businesses seeking equity crowdfunding had no revenue in the previous year, but 75% of those businesses expect to generate revenue in their current fiscal year, indicating that the majority are at the revenue-inflection point.
15% of businesses seeking funding are currently profitable, and 90% of the remainder predict that they will be profitable in 3 years or less.
30% of the businesses in the sample have patents or patent applications for proprietary technology.
Hollas noted that the sample analyzed for the report involved over 1,000 businesses and emphasized the significance to the industry of the first data-driven report based on 6 years of operation in the equity crowdfunding industry. “We feel that these statistics provide the first-ever information that can be readily extrapolated to represent the entire crowdfunding industry. Our report contains 15 data-packed charts, graphs, and related commentary. We hope that entities in the crowdfunding ecosystem find our report helpful as we approach the anticipated early-2014 date for the SEC to finalize their regulation-making process that will give legs to the Title III of the JOBS Act of 2012.”

EquityNet prepared this crowdfunding report in response to the widespread interest in equity crowdfunding as provided in the Jumpstart Our Business Startups (JOBS) Act that President Obama signed into law in April 2012. The JOBS Act relaxes regulations on fundraising for privately-held businesses and gives online funding platforms like EquityNet more flexibility in facilitating that fundraising. The crowdfunding provisions of the Act are getting the most attention because they will allow entrepreneurs to solicit the general public for investment, an activity that was previously prohibited. Proponents of the Act state that it will directly lead to more businesses starting and to increased employment – and that it will encourage business and technological innovation in the U.S.

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