Advocacy Research Finds Most Small Businesses Seeking Equity Crowdfunding Are Young Firms

WASHINGTON, D.C. – A new report by the Office of Advocacy analyzes trends in small business crowdfunding activity. The new report by Economist Lindsay Abate titled, “One Year of Equity Crowdfunding: Initial Market Developments and Trends,” analyzes Securities and Commission data following the implementation of the new securities-based crowdfunding rule Regulation Crowdfunding. It provides a first look at the small business adoption of equity crowdfunding.

The analysis found:

• Small businesses raised an aggregate of more than $30 million during the first year of equity crowdfunding activity, with an average of $289,000 raised in a successful campaign.
• There was significant geographic clustering among crowdfunding firms, with 50 percent of firms being located in California, Florida, and Texas.
• Equity crowdfunding was particularly popular among very young firms. Nearly a third of firms were six months or younger when initiating their crowdfunding campaign, and 88 percent were five years or younger at the time of filing.

The report highlights key attributes of the firms that have attempted to raise capital through this type of crowdfunding, including firm location, legal structure, firm age, employment, and leadership gender. It also describes trends among the online intermediaries responsible for hosting the campaigns, as well as transactional characteristics, such as the type of securities offered and the amount of capital sought and successfully raised.

”One Year of Equity Crowdfunding: Initial Market Developments and Trends,” is part of Advocacy’s Alternative Finance Series which focuses on the significance of alternative and emerging finance to small businesses. This series covers topics such as securities regulations, interest rates, and crowdfunding. It also informs policymakers, researchers, and small business owners on key finance-related issues. You can find Lindsay Abate’s report here: https://go.usa.gov/xQrXE .

For all of Advocacy’s issue briefs click here: https://www.sba.gov/advocacy/issue-briefs.