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August 19, 2022 | 4 Min Read

Equity Crowdfunding by the Numbers: July ’22

Equity Crowdfunding by the Numbers: July ’22

According to data from KingsCrowd, in July $27.0M was raised under Reg. CF campaigns and $10.3M was raised under Reg. A+ for a combined total of $37.3M across the equity crowdfunding industry*. Per the same data, StartEngine led the pack, posting the highest total amount of any platform at $10.5M raised between Reg. CF and Reg. A+ campaigns. That’s over 30% more raised than the #2 platform.

*Includes solely platforms selected by KingsCrowd and excludes real estate- and collectibles-only platforms, as well as Reg. D offerings and all raises limited to accredited investors.

Here's why that matters:

Record inflation and recession concerns have driven market volatility across the board. Public exchanges like the S&P 500, NASDAQ and Dow Jones have each fallen close to -10% since the start of the year. Private markets have also taken a hit, with VC and crowdfunding raise totals both down from their Q4 ‘21 highs.

BUT where there’s volatility, there’s also opportunity, and StartEngine seized the moment to consolidate our position as an equity crowdfunding industry leader. Case in point: even as the industry’s funding totals fell, StartEngine’s share of the pie actually grew.

StartEngine July Milestones:

Industries climbing the funding ladder:

July was a particularly good month for companies in the SaaS industry, whose combined Reg. CF and Reg. A+ funding totals were up $2.1M over last year’s numbers and more than $5M compared to June. Education and food & beverage businesses also saw strong YoY growth, with combined funding totals up $1.5M and $800K versus July ‘21 respectively.

July winners by combined funding total of Reg. CF & Reg. A+:

Industry

July ’22

July ’21

SaaS

$7.3M

$5.2M

Education

$2M

$494k

Food & Beverage

$3.4M

$2.5M

*Source = KingsCrowd Market Analytics

The SEC’s Small Business Capital Formation Advisory Committee (aka the group responsible for brainstorming the regulations that govern equity crowdfunding) sent a recommendation to Commission leadership to preempt securities issued under Tier 2 of Reg. A+.

Not fluent in SEC jargon? We got you – here’s the translation: Secondary trading for select private investments could be getting close to becoming MUCH easier. As is, private companies that want to allow secondary issuance – i.e. provide an offramp for investors to trade their shares – have to navigate a labyrinthine roster of regulations that differ across all 50 states and U.S. territories. It’s not fun. Preemption would drastically reduce the red tape by moving secondary issuance for certain private investments under one set of federal regulations.

This would constitute a huge win for investors and startups alike by giving a major boost to liquidity, which can make private investments more attractive. It also paves the way for all-around better diversification within the asset class through new financial tools, like trading private security funds – this would help reduce risk given startups’ notoriously high failure rate.

There are some significant caveats though: notably, the rule change would only apply to companies fundraising under Tier 2 of Reg. A+ when the bulk of equity crowdfunding is still under Reg. CF. The Committee’s recommendation is also no guarantee that the SEC will enact the changes. But it’s certainly a step in the right direction.

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