August 19, 2016 – Quarter 1 for Regulation Crowdfunding Results
The first quarter for Regulation Crowdfunding has ended and we believe the data continues to show slow and steady progress. Here are initial thoughts from our daily feed:
Healthy start with large average commitments
82 campaigns have been filed with the Securities and Exchange Commission (SEC) and $7.2M of capital commitments were recorded. From both a ‘capital committed’ and ‘number of campaigns launched’ point of view we believe this is a healthy start without any early signs of irrational behavior from issuers or investors. Active campaigns (those that are receiving commitments) average 145 backers and their average commitment is $810 (which is about 10 times the average donation or rewards commitment).
Slow weekly deal launch
The industry kicked off with a flurry of activity on May 16th and while some might think the low level of ‘weekly campaigns launched’ since then (~4) is a sign of problems, we believe it is too early to tell (even though our data shows an overall trend upwards in the weekly number of campaigns launched). Another quarter of activity will allow us to learn if there are problems with amount or quality of deal flow, lack of perceived investor interest or regulatory issues.
Issuer early moral = under promise and over deliver
Those companies that have exceeded their Target Offering Amounts (i.e. minimum they need to exceed to close) are doing so by huge margins (423%). Those that have set unrealistic expectations of what they believe they can raise from their crowds look like they are failing equally as huge. Moral of the story seems to be ‘under promise and over deliver’ when setting your target but make sure you can execute on your objectives if you only hit your minimum.
Jobs and economic stimulus
The majority of campaigns are active and raising with closing dates on average 90 days from now. With new companies continuing to come online we believe this will continue to bring more capital commitments as well. We are also impressed with the initial Jobs data. These initial companies report 286 jobs and while these were pre-existing, discussions with issuers and disclosure documents shows that capital raised will be used to support follow on jobs as well as 2nd party-providers, signaling both the potential for future direct and indirect job creation and economic stimulus.
Average capital weekly flows increasing
From a run rate perspective, the ‘Number of Days’ for all active offerings to raise $1M in capital commitments has shrunk from mid 20’s down to just 8 in the first quarter, signaling an rapid increase in capital commitments. Keep in mind that campaigns that fail to hit their funding target by their deadline have funds returned to investors, so capital commitments do not equate 100% to investments and already $188,695 has been returned to investors on campaigns that failed to hit their targets.
Campaigns Filed with SEC
Total Capital Commitments to date
Campaigns hit or were oversubscribed to the $1M cap
Current Average Investment Commitment
CAMPAIGNS: Companies are learning to aim low on their Target Offering Amount.
- 82 companies have filed for Regulation Crowdfund (Reg CF) offerings with the SEC. Collectively they are seeking $45.7M in capital.
- On average there are about 4 new companies raising funds each week. It does appear that ‘week over week’ more companies are filing with the SEC to raise Regulation Crowdfunds.
- Of the 82 that have filed, 61 of them are actively receiving funds (or have closed and hit their funding target).
- Of all the active campaigns, the average amount raised as of today is $117,315.
- The median Target Offering Amount (the minimum campaigns must raise in order to keep 100% of the proceeds) for all active campaigns is $50,000.
- 20 campaigns have exceeded their Target Offering Amount and are still actively raising or have closed.
- 12 campaigns have hit their deadline to reach the Target Offering Amount. Only 4 of those hit their Target and collectively received $1,756,406. The other 8 had commitments totaling $188,695. Since they did not hit their Target, by law, these funds are returned to investors.
- 21 campaigns have yet to start raising funds although 3 seem to have already passed their deadline to reach the target offering amount without receiving any capital commitments.
$1M Cap: 3 Companies hit or were oversubscribed for the maximum target of $1M. They are:
- Hops and Grain, a brewery in Austin, TX
- Legion M Entertainment, a Hollywood studio in Emeryville, CA and
- Beta Bionics, a diabetic medical device company out of Boston, MA
All 3 of these companies were listed on WeFunder and it appears that all 3 were oversubscribed (meaning that they took more reservations than the $1M Max cap and some subscriptions will need to be returned to investors).
BACKERS: As of today, the top 5 campaigns by the number of backers were:
# of Backers
Hops and Grain
The average number of backers per active campaign is currently 145.
CAPITAL FLOW: Daily capital commitments have been trending up from an average of around $50,000 per day to over $145,000 per day in Q1 although the overall daily average is around $96,000. Tuesday’s seem to be the best day of the week for campaigns raising on average $168,340. Saturdays seem to be the worst day to raise money at around $45,000. 26 states are included in the filings with the SEC. All regions of the country are showing activity with California far exceeding every other state in both the number of offerings (28) and the amount of capital committed ($2,655,161)
The Top States by Offerings:
# of Offerings
Texas, Ohio, Massachusetts, Illinois, Florida
The Top States by Capital Committed:
Capital Committed (US$)
SECTOR: Technology companies are leading the way in the number of offerings (30) but Food, Beverage, Wine and Spirits are leading in the amount of capital committed ($2,807,908) so while there may be more tech companies trying to raise money, the Main Street/Retail/Consumer Products sector seems to be attracting 49.5% more capital (perhaps signaling an engaged local community). Nonetheless, for the technology companies we believe their success will be attractive to follow on Angel or VC money.
The Top Sectors by Offerings
# of Offerings
Technology – Software/Games
Technology – Hardware
Wine & Spirits
Food & Beverage
The Top Sectors by Capital Committed
Capital Committed (US$)
Wine & Spirits:
Technology – Hardware:
Food & Beverage