Equity Crowdfunding 2020 Review
Equity Crowdfunding is taking the country by storm as it’s quickly becoming one of the most popular forms of funding in the United States. In 2020 alone, $500M had been raised by companies through Regulation CF. This is a 78% increase in the industry compared to the $281M raised in 2019 through Regulation CF.
2020’s 4th Quarter also showed record-breaking raising for Regulation Crowdfunding. In Q4, companies raised a total of $82.6M; this is a substantial increase from the previous quarter of $58.9M. Equity Crowdfunding is growing exponentially due to the ease of raising through this process.
The Economy During Q4 2020
To better understand how impressive Equity Crowdfunding’s performance was in Q4 2020, we need to look into the state of the Q4 economy. Although GDP and retail sales both increased Q4, the economy has yet to fully recover from the pandemic. Comparing Q4 2020 to Q4 2019, the GDP is down 2.5% showing the industry has record-breaking quarters even though the US economy is not back to pre-pandemic levels. Due to stricter lockdowns in certain states, 140,000+ jobs were lost, and in turn, consumer spending decreased. This could mean that the crowdfunding industry has plenty of room to grow for two reasons: as the economy rebounds to pre-pandemic levels, retail spending will surely increase. And the momentum crowdfunding currently carries is set to make it a household name for retail investors.
BreakDown of 2020 Q4 Regulation CF Offerings
There were 365 companies that raised through Regulation Crowdfunding in Q4 of 2020, 49 more companies than Q3. Not only did the number of companies raising increase, but the average total amount raised also significantly increased. This may indicate more investors are learning about Equity Crowdfunding and investing in these innovative startups.
A breakdown of the types of companies raising shows the food and beverage industry was on top, obtaining 15.5% of the total amount funded, or $12.7M, by Regulation Crowdfunding offerings. This is followed by Technology (9.0%), Media/Entertainment (8.1%), and Real Estate (7.5%).
4 of the top 5 industries that raised in Regulation Crowdfunding are also part of the most profitable industries in the United States to date. These include Banking/Investment, Media/Entertainment, Food and Beverages, and Real Estate.
Looking Towards the Future
A large reason for Equity Crowdfundings’ success in 2020 was due to the pandemic. Companies had to turn to funding in order to survive, which allowed the Equity Crowdfunding industry to explode, specifically in Q4 2020. Also, the number of new businesses continues to increase tremendously. Even with a pandemic, with thousands of jobs lost, there was a 26.7% increase in new business formations from Q4 2019 to Q4 2020. This helps provide evidence that the Equity Crowdfunding industry will continue to rise and gain more traction each year.
Looking towards the future, the vaccine rollouts have bolstered confidence that the economy will continue returning back to normal. However this normal may be a “new” normal, as many industries have been forever changed.
One factor that will change the Regulation Crowdfunding exemption forever is the SEC rule changes which were put into effect in mid-March 2021. This rule change now allows companies raising through Regulation Crowdfunding to raise up to $5 million rather than $1.07M, as well as increasing the investment limits. These changes are set to make Regulation Crowdfunding by far the most popular regulatory exemption to fund through, and this is the regulatory exemption PicMii specializes in.
The power of the retail investor is growing significantly every day, which was made very clear from the Robinhood and Gamestop situation. Retail investors are showing more and more interest in everyday investing, and PicMii has provided them a great platform to do so.