Investment Crowdfunding November Results

In what has been a volatile year for the public markets and investment crowdfunding, November saw another mixed bag of results. The number of new offerings was relatively flat over the prior month; however, there were fewer investors, but they continued to write larger checks. “We expected a pullback in the number of investors and total capital commitments,” says Sherwood Neiss, Principal at Crowdfund Capital Advisors, “But it is interesting to see, given the current investing environment, that they are writing the biggest checks yet.”

After Federal Reserve Chair Jay Powell’s speech, this week confirming that the Fed will slow the pace of interest rate hikes, YTD public market losses continue to shrink. “Perhaps this signals that the worst of inflation is behind us, and a pending recession will not be as long or as deep,” says Neiss. “2022 will be the first down year for the industry in terms of capital commitments and the number of investors. However, given what seems to be a turning point in the Fed’s outlook for the future, we expect 2023 to be a better year.”

The number of new issuers is down over the prior year; however, it is up slightly over October and hovering at the average for the year. “So, issuers are still coming online for capital,” says Neiss. “However, their demand for capital, as measured by their maximum targets, is down 37.8% over the prior year, perhaps signaling entrepreneurs' understanding of the reality of the current capital markets. We believe this is causing some entrepreneurs to continue to hold off on their raises which means they need to be more efficient with the capital they have on hand.”

“While the number of investors is at the lowest for the year, they are still deploying capital,” says Neiss, “Post-revenue issuers far outpaced their pre-revenue counterparts 3.5 times in terms of every dollar deployed, and investors ended up writing the biggest average checks for any month of investment crowdfunding. So given the market contrition, there’s still an opportunity for post-revenue issuers to raise funds as investors perhaps see them as less risky in the current environment.”

Median valuations held steady for the past three months, hovering around $12M. “We expect this number to decline as current market conditions mean issuers need to adjust their valuations to attract capital,” says Neiss.

StartEngine had the most new offerings, followed by Wefunder, Republic, Honeycomb, and Mainvest. However, Wefunder raised the most capital, followed by StartEngine, Equifund, Republic, and SeedInvest.

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