The rise of equity crowdfunding

The adoption of equity crowdfunding platforms has not only enabled garage and seed startups to explore alternative financing options but has also brought investors who are looking for long-term growth opportunities to the fore. This has prompted the SEC to relax the rules governing crowdfunding and increase the maximum amount that start-ups can raise through equity crowdfunding from $1.07M to $5M. Consequently, The value of equity crowdfunding deals is expected to grow to $5B by 2022 at a CAGR of around 32.5%.

Investors have invested in companies like Slack, AirBnB, Spotify, and Lyft on Microventures to seek the growth opportunities for their wealth. Microventures has seen a 57% YoY increase in website traffic in Nov’20. StartEngine helped companies raise nearly $138M via its platform in 2020, an increase of 215% compared to last year. Their stated goal is to raise $10B through crowdfunding by 2029. It has seen its website traffic surge by 215% YoY. Republic, whose platform has been used to raise funds by start-ups like Robinhood, has seen its website traffic increase by 63% YoY and employee count increase by 161% YTD, as of Nov’20.

The platforms are also leveraging the increased interest to launch new initiatives. WeFunder launched a Coronavirus Crisis Loan program to help small businesses tide over the pandemic by allowing them to raise finance on friendlier terms. It saw a 35% increase in investment volume and 200% growth in high quality applications to raise funds through its platform in May ’20. This boom in business is reflected in the increase in website traffic of 181% compared to last year. It has also seen fit to expand its workforce by 10% in the last 6 months to meet the rising demand.

UK-based Equity crowdfunding platforms Crowdcube and Seedrs have also seen remarkable growth in the past year. Start-ups like Monzo and Brewdog have reached their funding targets on Crowdcube. Crowdcube and Seedrs have seen their website traffic increase by 90% and 75% respectively over the past six months in Nov’20.

With the increasing need for flexibility for start-ups, the relaxing regulations, and retail investors looking for diversity in their portfolio, the future for equity crowdfunding looks highly promising.