Startups choosing the crowd-way
The adoption of equity crowdfunding platforms has not only enabled garage and seed startups to explore alternative financing options but has also brought investors who are looking for long-term growth opportunities to the fore. This has prompted the SEC to relax the rules governing crowdfunding and increase the maximum amount that start-ups can raise through equity crowdfunding from $1.07M to $5M. Consequently, The value of equity crowdfunding deals is expected to grow to $5B by 2022 at a CAGR of around 32.5%.
Investors have invested in companies like Slack, AirBnB, Spotify, and Lyft on Microventures to seek the growth opportunities for their wealth. Microventures has seen a 57% YoY increase in website traffic in Nov’20. StartEngine helped companies raise nearly $138M via its platform in 2020, an increase of 215% compared to last year. Their stated goal is to raise $10B through crowdfunding by 2029. It has seen its website traffic surge by 215% YoY. Republic, whose platform has been used to raise funds by start-ups like Robinhood, has seen its website traffic increase by 63% YoY and employee count increase by 161% YTD, as of Nov’20.
The platforms are also leveraging the increased interest to launch new initiatives. WeFunder launched a Coronavirus Crisis Loan program to help small businesses tide over the pandemic by allowing them to raise finance on friendlier terms. It saw a 35% increase in investment volume and 200% growth in high quality applications to raise funds through its platform in May ’20. This boom in business is reflected in the increase in website traffic of 181% compared to last year. It has also seen fit to expand its workforce by 10% in the last 6 months to meet the rising demand.
UK-based Equity crowdfunding platforms Crowdcube and Seedrs have also seen remarkable growth in the past year. Start-ups like Monzo and Brewdog have reached their funding targets on Crowdcube. Crowdcube and Seedrs have seen their website traffic increase by 90% and 75% respectively over the past six months in Nov’20.
With the increasing need for flexibility for start-ups, the relaxing regulations, and retail investors looking for diversity in their portfolio, the future for equity crowdfunding looks highly promising.