July 04, 2017 • 6 Min Read

The StartEngine Index: June 2017 - StartEngine

By Howard Marks

*Revised at 11:30 AM PT on July, 11 2017.

June 2017

Here come the fireworks.

The following data covers Regulation Crowdfunding raises between May 16, 2016, and June 30, 2017. Some data refers only to raises in 2017. Data is sourced from all publicly disclosed Form C filings on the following portals.

Index: 470

At the end of June 2017, companies have raised over $47M in funding through Regulation Crowdfunding. The index has increased by 21%, beating the annualized compounded growth rate of 16%

Total Capital Raised

Type of Securities Offered

Common shares represent 31% of the type of securities raised since the inception of Regulation Crowdfunding. This is followed by the SAFE which accounts for 23%. Debt offerings represent 20% of the market.

Types of Securities Offered Since May 2016

Average Company Makeup

The average company had 6 employees and is 3 years old. The average company had under $500K in assets, under $100K in cash, and an average of just under $400K in revenue. The average company is not profitable with an average $235K loss in the last fiscal year.

State of Operation

About 48% of companies who have raised capital since the inception of the Regulation Crowdfunding are from California. The next most popular state is Texas with 12%, followed by New York with 8%.

County of Operation

All three top counties come from California. The county with the most raised from Regulation Crowdfunding is San Diego County with $4M raised by 9 companies, followed by San Francisco County with $3.9M raised by 18 companies. Los Angeles County has the most number of companies with 25 in total who have together raised $3.8M.

Funding Portals in 2017

Since the beginning of the year (Q1 and Q2 inclusive), the funding portal on which the most money was raised in Regulation Crowdfunding was Wefunder with $8.7M, followed by StartEngine with $6.9M, and First Democracy VC (Micro Ventures and Indiegogo) with $3.5M. These amounts do not include capital raised through Regulation A+ which are usually over $1M up to a maximum limit of $50M.

The Top 10 Raises in Regulation Crowdfunding in 2017

Raising in Los Angeles

By number, Los Angeles County accounts for the most Regulation Crowdfunding raises of any county in the country.* Over 30 companies who have raised are from LA.

Not So SAFE in SoCal

Apparently, for the SAFE Note is not as popular in SoCal as it is in the rest of the country. Of the $3.8M raised by LA companies, only 18% was through SAFE Notes, compared to 57.3% for Common Stock. Nationally, the difference is much narrower.

Amount Raised by Types of Securities Offered in Los Angeles County

SAFE Notes are used frequently in Silicon Valley by traditional VCs and angels; they’re being used in alternative investing as well, even though they’ve fallen under recent scrutiny.

In San Francisco, more has been raised through the SAFE Note ($1.1M) and Preferred Stock ($1.0M) than has been raised in LA. Common Stock raises in San Francisco account for only $29K, compared to $2.1M in LA.

Amount Raised by Types of Securities Offered in San Francisco County

Younger Companies, Earlier Adopters

In LA, the average company is made up of only 3.15 employees compared to the nationwide average of 6. The average company has been around for about 2 years (1 year younger than the national average). Lower revenues reflect the newness of the companies: LA companies have an average of $165,798 in revenue, compared to the $400K national average.

Top 10 All-Time LA Raises in Regulation Crowdfunding

Background

Upon the one-year anniversary of the adoption of Regulation Crowdfunding in the U.S., StartEngine developed an index to track the progress of the entire industry. We report on trends monthly, and will add information across equity crowdfunding regulations as it becomes available. Stay tuned every month.

*An earlier edition of this report falsely indicated that 25% of all raises came from Los Angeles. 25% of raises within the top 10 counties nationwide came from Los Angeles. LA accounts for about 8% of total raises.

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