As we begin to prepare a 2014 year in review report we make the not so difficult observation that it will be the biggest year for Equity Crowdfunding in the United States. This feat is reached even while the majority of the nation is still in wait for access to invest. Funding amounts posted on equity funding platforms may appear larger due to the fact that there is no regulation around how to classify the funding round and amount invested. Below is a record of our research and a few examples of how we came to this conclusion.
The below is a snapshot of online equity funding activity for US based platforms for 2014 from our premium investment tool. There are 2 large spikes in the screenshot which are explained below.
Examples of Firms Raising Mostly Offline
The first spike represents $50 million in funding for Life360 on AngelList. This was a series C funding round, or the largest funding round for any crowdfunding platform. Life360 only dedicated 1% of that amount, or $500,000, to AngelList. At half a million this would not even put the round in the top 20. Even though a small percent was raised through AngelList it is the first time a business raised series C money online. Chris Hulls, Founder & CEO of Life360 shared his pleasure with his ability to extend his offering to Angels at the Harvard Business School Cyberposium 2014. Who will be next to raise later stage financing?
The second spike from above represents Galloway Realty LLC which EquityNet states, raised $17 million raised so far. We spoke to Paul Galloway and found that none of the $17 million was raised online through EquityNet. Paul stated he had raised the funds from his own network of investors.
If the amount funded through the platform was used, the above chart would look drastically different. Below are further examples of the difficulties in classifying funded amounts.
WeFunder states $11,495,200 was raised for Terrafugia. Terrafugia's 7 previous fully disclosed funding rounds total $5.8 million, part of the reported figure. The amount WeFunder raised directly online is a portion of that remainder, but the amount is not disclosed. Our only option for us is to list the full $11 million which does not appear on the report above as Terrafugia closed the funding round in 2013.
Listing on Several Platforms Concurrently
Bitvore was listed on CrowdFunder, AngelList, and Fundable all at the same time. Bitvore closed a Series A round of $4.5 million. Bitvore stated they raised $1 million through crowdfunding. According to their Crowdfunder blog post $435,000 came from Crowdfunder, $200,000 was raised on AngelList, the remainder of the $1 million would have come from Fundable. On this video blog post the founders of Bitvore praise the work of Chance Barnett, Crowdfunder, and the crowdfunding industry as a whole.
Our assumption is that these are not the only cases of online funding amounts being a fraction of the amount invested direct online, but so far the only offerings we have been able to gather details for. There is a difficulty determining just how much money is transferred online as most do not disclose this figure. We will continue to work to provide insight and transparency to the market. Please feel free to share your experiences funding in the comments below.
Companies are using equity funding platforms as a way to market their offering to attract investment while the majority of money is being invested is being done so offline. With the proliferation of Equity Crowdfunding platforms, stemming from the lift of the ban on general solicitation through the JOBS Act, startups have greater opportunity to raise money. Even though online funding or market activity may be difficult to determine, making our job to pull together a year end report difficult, the disruption of venture and angel investing by these platforms through transparency has no doubt helped entrepreneurs. This industry will stimulate economic growth through innovation and increased competitive pressures. This is only the beginning of that disruption. While the US waits for the passing of Title III of the JOBS act, countries that have allowed their entire population to invest in startups online are seeing strong innovative growth and economic impact.