The stars are aligning in the crowdfunding universe and we seem to be careening towards the tipping point. This pandemic has accelerated the seismic shifts already underway in the financial industry and upended the status quo. The bloated and ineffective venture capital industry has largely been sidelined, while crowdfunding has stepped up to the plate and been furiously funding small businesses. Look at us! Who woulda thought? Probably not VCs ????
Changing of the guards
In the past, July has typically been one of the quietest months, but now, it smashed records. According to Sherwood Neiss of Crowdfund Capital Advisors, July witnessed the highest:
- month of new offerings ever in equity crowdfunding;
- amount of investor commitments (a whopping $23.2 million);
- number of investors (more than 40,000).
*blasts the Rocky theme*
Juxtaposed against this stellar data is a 30% dip in global venture capital funding while VC rounds dropped 44% overall and 57% for seed-stage startups in America. Adding insult to injury are embarrassing flameouts like WeWork, Juul, the Fyre Festival and Theranos (plus so many more) which have proven themselves to be colossal wastes of investor money and albatrosses around their necks.
Come one, come all
With small businesses accounting for 99.7% of all employers in America—and being overwhelmingly left in the cold by Federal PPP relief funds—crowdfunding has kicked into overdrive. This must have caught the attention of the SEC, because they approved a temporary cap boost to $250K from $107K, as conditional relief to make raising money using equity crowdfunding (with minimal documentation) easier. Is it really any surprise that new and young businesses are flocking into the crowdfunding arena, when Federal relief and VCs have shut the door in their faces? Nope!
Not surprisingly, market awareness of crowdfunding has surged, as entrepreneurs are actively searching for funding and realizing there’s a much better deal waiting for them than fighting over scraps of venture capital money and ceding control of their company. Crowdfunding is about to overtake the financial industry to fund the shit out of small businesses to get Americans (safely) back to work. Crowdfunding is open for business and everyone is invited.