Assessing the Title III Crowdfunding Market After 10 Weeks
Published on August 5, 2016
Wefunder Still Dominates the Market with over 40 percent of the Offerings
By David M. Freedman
Observations about the Title III (Regulation CF) crowdfunding market, 10 weeks into the launch of this new asset class:
- Investors have committed over $5 million to securities issued by startups and small companies under Title III since May 16, according to Crowdfunding Capital Advisors . That’s a substantial amount considering a majority of Title III offerings have investment minimums of $100 or less.
- Of the 50 Title III offerings listed and rated by Stratifund, 44 of them have investment minimums of $500 or less. This is a radical departure from traditional angel investing, where minimums are typically tens of thousands. One result is that angel investing becomes very socially motivated — who is going to conduct thorough due diligence for a $100 or $250 investment?
- The dominant securities in Title III offerings are common stock and SAFEs (simple agreement for future equity). The theme: keep it simple. Inexperienced angel investors will tend to be intimidated by more complicated preferred-stock and convertible-debt term sheets.
- Wefunder continues to dominate the Title III securities market, with over 40 percent of the deals. Wefunder’s average deal rating, according to Stratifund, is among the best also.
- SeedInvest, Republic and Venture.co (followed closely by Wefunder) are the portals with the highest-rated Title III equity deals on average, according to Stratifund data. See complete Stratifund ratings by funding portal here .
- NextSeed has the highest-rated Title III debt deals.
- WR Hambrecht has the best-rated Title IV (Regulation A+) deals, which are open to all investors.
Securities crowdfunding is on the radar of entrepreneurs across the country. Still, I consider the market to be sluggish because retail investors, those who have little or no experience investing in private securities, haven’t caught on in big numbers. Most people haven’t heard of it or couldn’t care less. That might change if and when Indiegogo or another large, high-profile intermediary gets involved. They might be waiting, however, for Congress to “fix” securities crowdfunding.
— David M. Freedman has worked as a financial and legal journalist since 1978. He is a coauthor of Equity Crowdfunding for Investors, published in 20125 by Wiley & Sons. Details: www.ec4i.com.
Categories: Market Data and Deal Flow