Equity crowdfunding—— Or community fundraising, as the fundraising platforms involved prefer to call it – which has grown steadily over the past few years. Regulations governing the process continue to move in favor of the market, and the 2022 VC drawdown could be the last piece needed to calm the fundraising strategy’s opponents forever.
This year appears to have marked a milestone for equity crowdfunding, which requires raising funds from a portfolio of investors that do not require certification through specific filings with the U.S. Securities and Exchange Commission, including Reg CF and Reg A.
Over the past few years, equity crowdfunding has shaken off many of the stigmas of the past that only companies that weren’t good enough for venture capital could raise money this way. Some traditional VCs even seek out or encourage their portfolio companies to pursue the process on the platform. But with the fundraising climate now showing cloudy skies, equity crowdfunding is gearing up for Field Day.
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More than $215 million had been invested in startups on equity crowdfunding platforms through the end of May this year, up from about $200 million a year earlier, according to the Arora Project, a platform owned by the Republic that curates crowdfunding plans and tracks data. Crowdfunding The campaign raised a total of $502 million in 2021.
While it’s not a huge leap, industry players are encouraged by the growth and see more room for improvement later in the year, as crowdfunding typically picks up around the fourth quarter.