After two record-breaking years in 2020 and 2021, Regulation Crowdfunding (Reg CF) and Regulation A (Reg A) had another great year in 2022. While 2022 didn’t surpass the records set by equity crowdfunding in 2021, the industry continued to mature and evolve despite the macroeconomic headwinds caused by rising interest rates, high inflation, war, and numerous other factors.
2022 Equity Crowdfunding Summary
In aggregate, Reg CF and Reg A companies had a solid performance in 2022, although it’s apparent that investor demand (but not issuer supply) was significantly weakening as of Q4-2022.
Key equity crowdfunding statistics for 2022 include:
$494.0 million raised via Regulation Crowdfunding (Reg CF)
Raised across 33 active platforms (funding portals or broker-dealers)
Average investor check size = $1,256
The average is calculated from all platforms that had at least 15 or more deals
394,354 total investments1
$431.8 million was raised via Regulation A (Reg A)
Primarily from eight (8) Reg A platforms
Average investor check size = $4,470
107,178 total investments1
Note 1: not all platforms report investor numbers, so this is lower than the number of actual investments made.
Regulation A Capital Raised By Year
With the first Reg A+ campaign going live in June of 2015, the industry has taken some time to establish itself. Reg A is still very new and we are in the early stages of this industry as a whole. Here is a look at capital raised by year under Reg A:
2015 (partial year) = $9.6M
2016 = $229M
2017 = $430M
2018 = $736M
2019 = $1.04B
2020 = $1.4B (estimated)
2021 = $1.85B (estimated)
Equity crowdfunding outperforms traditional markets in 2022 with a $30 billion a year growth forecast by 2028
If 2022 is remembered as the year equity crowdfunding cemented its position against more traditional investments, 2023 will surely go on record as an important year for this form of alternative investment to further democratize private securities.
According to new research by Statista, global spending on equity crowdfunding will top $17.8 billion by the end of 2023 – up more than 15% on 2022 ($15.13 billion) and a staggering 189% since 2020 – the US market percentage growth is even faster at 17% in 2022 against a backdrop of major geopolitical challenges.
A key factor has been a growing level of retail and accredited investor confidence following more improved legislation, courtesy of the JOBS Act. Equity crowdfunding now has a proven track record and improved regulatory oversight and is becoming more attractive as a result, especially following the problems of cryptocurrency exchanges.
Writing in Forbes recently, Jeff Bartel, Chairman, and Managing Director of Miami-based private investment and strategic advisory firm Hamptons Group, said: “Equity crowdfunding has become so popular that one estimate suggests more than 50% of campaigns successfully meet their initial goals, and 78% [of those] can generate enough funds to exceed their goals.
“This is a trend that is expected to continue for some time. Experts predict the equity crowdfunding market will reach nearly $43 billion by 2028.”
Meanwhile, traditional investments in public markets have declined, with the S&P 500 down 20% in the year to date, and alternative investments in cryptocurrency exchanges suffering major setbacks and falling values recently.
By contrast, equity crowdfunding continued to gain popularity among investors and start-ups keen to find a different route to accessing finance previously dominated by the big venture capitalists and public market IPOs.
For private company entrepreneurs, it allows them to continue to steer the ship while also accessing the capital to invest and accelerate growth through building their community of advocates and investors.
According to research published in December, by Grand View Research, “growing demand for integrating innovative technologies such as blockchain, machine learning, and Artificial Intelligence (AI) into various digital platforms is expected to propel the growth of the segment”.
And its rise is mirrored in the decline of traditional IPOs. Data from StockAnalysis.com revealed, as of September 12, there had been just 153 IPOs on the US stock market in 2022– a 78.9% drop against the same point in 2021.
While a report published by EY in December revealed the number of US IPOs during quarter three of 2022 fell by 74% on the previous year, with proceeds consequently down by 94% through the first nine months compared to 2021. It added that US public stock markets are set to record their lowest proceeds since 2003.