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Investments in crowdfunding platforms have already doubled this year

Investments in crowdfunding platforms have already doubled this year | Accredited investor | Scoop.it

With almost three quarters of 2014 complete, angel and venture capital has poured more than $140 million into the infrastructure of crowdfunding, more than double the amount invested last year and 43% more in individual deals. Where is all this money going?

For four years, my firm has been studying the crowdfunding space. The crowdfunding industry encompasses all forms of crowd finance: donation, perks/pre-order, debt, and equity. Still nascent in its growth, serious investments started to flow into the space in 2011, with three deals totaling $13.5 million. A year later, three more investments totaled $18.6 million.

During 2012, our work in Washington, D.C. culminated in the form of the JOBS Act, and major provisions were signed into law, including Title II, lifting the ban on general solicitation to accredited investors, and Title III, debt and equity crowdfunding. Savvy entrepreneurs who understood what these fundamental changes meant began building and scaling all forms of crowd finance platforms.

2013 was a breakout year for crowdfunding. A total of $71 million went into seven major deals that year. This represents a 133% growth over 2012, with more than twice as many deals. Lending and rewards platforms were the greatest beneficiary of these investments. Now, in just eight months of 2014 more than $140 million has been pumped into at least 10 deals (we expect this to be close to $250 million by year’s end). Five of these deals were over $14 million each, totaling $124 million.

Interestingly enough, we’re starting to see significant capital poured into the equity crowdfunding space even though Title III of the JOBS Act has yet to go into effect. (We did, however, let the SEC know that, two-plus years since President Obama gave it the green light, an industry is primed and ready to go).

So what trends are we seeing?

Size of rounds: Series A investments across the board are averaging $6 million. Series B rounds jump to $28 million, and C and D to around $45 million each as companies seek more capital to scale, grow, and beat out the competition. Since lending platforms are the biggest and most mature, they’ve been pushing the average deal size up in the later rounds.

Number of startups by round: Over 25 companies have completed Series A rounds, 13 Series B, and 10 Series C and above.

Average investment by round: The average A round for equity platforms is $5.75 million. For lending platforms, the average is $5.1 million. And reward platforms lead the pack at almost $7 million.

Average valuation by platform type: Valuations are across the board, but if we are conservative and assume investors might seek 20% equity for an A round, then valuations average $28.75 million for equity platforms, $25.5 million for lending platforms, and $35 million for rewards platforms.

According to our research, in total almost $1 billion has been invested into the crowd finance arena since 2006. Six lending platforms have collectively raised over $450 million, which reflects not only the investor interest in these peer-to-peer (P2P) and peer-to-business (P2B) platforms but also a justification of their business models. Interestingly enough, the P2P space last year saw $1 billion flow from investors to borrowers, with demand now exceeding supply as institutional investors try to buy up these loans — another data point in why the crowd finance arena is serious business.

Over 10 rewards platforms have received over $275 million in investments. Kickstarter and Indiegogo have the biggest names in the space, but platforms like Quirky received substantial later-stage rounds, and relative newbie Crowdtilt closed a significant B round of $23 million.

More than seven equity crowdfunding platforms have received over $180 million in financing, with the oldest among them being only four-years old. This too shows validation for a business model of which one of the two models (Title III, crowdfunding for all) has yet to go into effect. We anticipate equity crowdfunding to blossom in the next 36 months, with a majority of venture capital flowing into this space as early movers are proving the model, the media is covering it with more interest, and the global appetite for this sector expands significantly.

New market entrants, new technologies, and new businesses (think crowd education, crowd vetting tools, crowd analytic, and crowd investor relations) are launching to support the crowdfunding industry, and we are keeping an eye on them. Actually, we are doing more than that; we are placing our bets on who we think the winners will be with our own capital.

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Finextra: Nyse Euronext takes stake in private placement start-up ACE

Finextra: Nyse Euronext takes stake in private placement start-up ACE | Accredited investor | Scoop.it
“ Nyse Euronext has acquired a minority stake in ACE as it bids to enter the market for private placement of securities.”
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Toby Babb - 0203 00 22 850's curator insight, September 10, 2013 2:19 AM

Further examples of bigger players identifying in innovative businesses in the industry to establish stronger market presence in emerging sectors. This trend presents an excellent opportunity for start up companies and SMEs in tech to attract investment with the right product and positioning.

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INVESTOR VERIFICATION: QUESTIONS AND ANSWERS FROM ...

INVESTOR VERIFICATION: QUESTIONS AND ANSWERS FROM ... | Accredited investor | Scoop.it
“If a purchaser's annual income is not reported in U.S. dollars, what exchange rate should an issuer use to determine whether the purchaser's income meets the income test for qualifying as an accredited investor?”
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Investor Advisory Committee Decides to Seek More Data Before Recommendation on Accredited Investor Definition - Crowdfund Insider

Investor Advisory Committee Decides to Seek More Data Before Recommendation on Accredited Investor Definition - Crowdfund Insider | Accredited investor | Scoop.it
“The Securities and Exchange Commission hosted a meeting of the Investor Advisory Committee yesterday where they tackled the very important issue of definin”
Via Thomas Faltin
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SeedInvest to SEC: "Increasing Accredited Investor Thresholds Would Be Disastrous for Small Business" - Crowdfund Insider

SeedInvest to SEC: "Increasing Accredited Investor Thresholds Would Be Disastrous for Small Business" - Crowdfund Insider | Accredited investor | Scoop.it
“On the day when the SEC's Investor Advisory Committee is scheduled to discuss the definition of an "Accredited Investor", SeedInvest - one of the leading e”
Via Thomas Faltin
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General Solicitation: Before & After the JOBS Act | Ultimate Finance ...

General Solicitation: Before & After the JOBS Act | Ultimate Finance ... | Accredited investor | Scoop.it
“Since Title II of the Jumpstart Our Business Startups Act was signed into law, business owners have been given the legal freedom to implement general. ...”
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Crowdfunding Cheat Sheet | crowdfundattny

Crowdfunding Cheat Sheet | crowdfundattny | Accredited investor | Scoop.it
“Those satisfied with raising money from only accredited investors will probably look to the simplicity of Title II while those needing to cast a wider net will likely take the plunge into Regulation A+.”
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Title II & Title III Take Center Stage as Experts Discuss Equity Crowdfunding ... - Crowdfund Insider

Title II & Title III Take Center Stage as Experts Discuss Equity Crowdfunding ... - Crowdfund Insider | Accredited investor | Scoop.it
“Crowdfund Insider Title II & Title III Take Center Stage as Experts Discuss Equity Crowdfunding ... Crowdfund Insider 30 and 31 to discuss the future of equity, debt and real estate crowdfunding.”
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Next Generation Trust Services to Co-Present Webinar for Accredited Investors on Investing in Startup Companies on December 10 - HispanicBusiness.com

Roseland, NJ (PRWEB) November 30, 2013 Next Generation Trust Services, an administrator of self-directed retirement plans, will co-present “The Alternative Market and Self-Directed Retirement Plans,” a free informational webinar about investing in...
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The outlook for debt and equity crowdfunding in 2014 | VentureBeat ...

The outlook for debt and equity crowdfunding in 2014 | VentureBeat ... | Accredited investor | Scoop.it
“... Securities and Exchange Commission implemented rules governing Title II of the Jumpstart Our Business Startups (JOBS) Act, which permits companies to advertise their private securities offerings to accredited investors.”
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JOBS Act Changes – A General Solicitation Primer (Part 1 of 2 ...

JOBS Act Changes – A General Solicitation Primer (Part 1 of 2 ... | Accredited investor | Scoop.it
“Officially, Title II of the JOBS Act makes changes to Rule 506 of Regulation D in the Securities Act. Rule 506 was considered a “safe harbor” for private offering of securities.”
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SEC Lifts Ban on General Solicitation; Implements First Phase of ...

SEC Lifts Ban on General Solicitation; Implements First Phase of ... | Accredited investor | Scoop.it
“SEC Lifts Ban on General Solicitation; Implements First Phase of JOBS Act for Reg. D, Title II Accredited Investors · 22 Sep. SEC Lifts 80-Year Ban on the General Solicitation of Private Placement Equity Investments.”
Brian's insight:
It's starting. Selling securities on the internet!
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The JOBS Act Allows Accredited Investors More Crowd Funding ...

The JOBS Act Allows Accredited Investors More Crowd Funding ... | Accredited investor | Scoop.it
Currently businesses can solicit for funds from qualifying accredited investors under SEC Rule 506(c) of Regulation D. Title II of the JOBS Act lifted the ban of general solicitation of SEC Rule 506 Regulation D Private ...
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“ACCREDITED INVESTOR,” WHAT IT MEANS AND WHY IT ...

“ACCREDITED INVESTOR,” WHAT IT MEANS AND WHY IT ... | Accredited investor | Scoop.it
“... in a particular privately held (i.e. not publicly traded) company. Qualifying as an accredited investor has become even more important with the enactment of Title II of the J.O.B.S.”
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Don't Raise the Accredited Investor Threshold; Change the Approach - Small Business Trends

Don't Raise the Accredited Investor Threshold; Change the Approach - Small Business Trends | Accredited investor | Scoop.it
“Don't Raise the Accredited Investor Threshold; Change the Approach Small Business Trends Following a requirement of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, the Securities and Exchange Commission (SEC) will consider...”
Via Thomas Faltin
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Accredited Investor Crowdfunding Platforms: A Brief History

Accredited Investor Crowdfunding Platforms: A Brief History | Accredited investor | Scoop.it
“Thomas Vass, manager at The Private Capital Market, writes in to share an excerpt from his forthcoming book, Accredited Investor Crowdfunding: A Practical Guide for Technology Executives and Entrepreneurs. In this part, Vass explains the history of fundin”
Via Thomas Faltin
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Is it time for the JOBS Act, Part Two? - Strictly Business

Is it time for the JOBS Act, Part Two? - Strictly Business | Accredited investor | Scoop.it
“If funds are raised from non-accredited investors, an intermediary that complies with Section 4A(a) (discussed below) must be used; Issuer provides potential investors with financial statements that have been certified or reviewed in ....”
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Opening Up Venture Capital to the Accredited Crowd - Crowdsourcing.org

Opening Up Venture Capital to the Accredited Crowd - Crowdsourcing.org | Accredited investor | Scoop.it
“Crowdsourcing.org Opening Up Venture Capital to the Accredited Crowd Crowdsourcing.org One of those sections — Title II, which is sometimes referred to as accredited investor crowdfunding — came into effect on September 23.”
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front lines: A Regulatory Change That Would Crush the Ability of ...

front lines: A Regulatory Change That Would Crush the Ability of ... | Accredited investor | Scoop.it
“The Securities and Exchange Commission (SEC) is considering a regulatory change—increasing the “accredited investor” income and net worth thresholds in Regulation D—that would reduce the pool of potential investors in small businesses and start-up...”
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Crowdfunding – Predictions for 2014 | David Kirkup, B2B CFO®

Crowdfunding – Predictions for 2014 | David Kirkup, B2B CFO® | Accredited investor | Scoop.it
“Last September, we saw Title II of the US JOBS Act enacted into law, giving entrepreneurs the opportunity to publicly advertise their need for funding. This law has provided entrepreneurs with a much larger pool of investors to ...”
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EquityHunt: Connecting Accredited Investors with Real Estate ...

EquityHunt: Connecting Accredited Investors with Real Estate ... | Accredited investor | Scoop.it
“We recently spoke with the founders of EquityHunt, a meeting place for accredited investors and real estate developers. Relying on the Title II JOBS Act rules, EquityHunt serves solely as a matchmaker between the two parties ...”
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Regulation A+ Offerings—A New Era at the SEC — The Harvard ...

“Indeed, it seems that, at long last, the battle that has been assiduously avoided by the SEC in recent decades, federal pre-emption of offerings involving non-accredited investors from state blue sky review, has finally begun.”
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The JOBS Act: Misreporting & Setting The Record Straight - Crowdfund Insider

The JOBS Act: Misreporting & Setting The Record Straight - Crowdfund Insider | Accredited investor | Scoop.it
In the wake of legalized general solicitation under Rule 506(c), some media outlets, individuals and pundits have shared information that is not accurate.
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