The Evolution of Investment Crowdfunding
Early Data and Insights, Title IV Reg A+
NextGen Crowdfunding has undertaken an analysis of how businesses have responded to recent changes in investment crowdfunding. The results will be presented in this paper, as well as in forthcoming quarterly reports. This paper examines Title IV Regulation A+ introduced in June 2015. This legislation allows companies to raise up to $50 million dollars from investors through crowdfunding. It will be followed over the coming months with an examination of Title III Regulation CF, introduced in May 2016. Title III/Regulation CF allows companies to raise up to $1 million from investors.
Our analysis shows that the initial pool of companies using Tier 2* sought $1.66 billion with a per-firm average of $25.2 million, compared to $353 million and $6.0 million respectively for Tier 1* firms. Contrary to the expectations of many policy makers, a significant number of mature and late-stage companies participate in Regulation A+ filings. The oldest firm has been operating for 37 years and 22 of the 131 firms, or nearly 16.5%, have been in business for 10 years or longer.
Seventy-nine of the 131 firms reported earning no revenue. It is somewhat surprising to see pre-revenue startups exploring what is essentially a small IPO. The wide variation in maturity, revenue, industry sector and geography suggest that Title IV of the JOBS Act is being explored as an alternative funding source by a wide range of firms, though finance related companies, banking and business services seem to dominate the filings. The chart below shows activity across the U.S. regions, amounts sought, and the leading industry sectors filing to use Regulation A+.
In addition to this Reg A+ data, NextGen also tracks data on Title III (Regulation Crowdfunding) through its industry-leading Crowdfunding Dashboard. Readers can see summary progress of crowdfunding companies along with detail progress of individual companies. To access this Crowdfunding Dashboard, readers are encouraged to create a free account at www.nextgencrowdfunding.com.
*Tier 1 firms intend to register with individual states. Tier 2 firms are exempt from state registration.