Stratifund Rates 98 Crowdfunding Investments
Published on November 24, 2016
Six months after the launch of Regulation CF, NextSeed and Wefunder are the portals with the highest-rated Reg CF offerings, on average.
By David M. Freedman
¶ Since May 2016, nearly 150 startups and early-stage companies have listed their securities – mostly equity but some debt as well – on more than a dozen crowdfunding portals operating under Title III of the Jumpstart Our Business Startups Act of 2012. Angel investors have committed $12 million dollars to these offerings, and a handful of them have already been fully funded.
More than half of all Title III offerings have minimum investment amounts of $100 or less, making this new asset class accessible to modest-income investors.
Since May, Stratifund has been rating Title III (also called Regulation CF) offerings as well as Title IV (also called Regulation A+) offerings, both of which are open to all investors regardless of their income or net worth. (Reg A+ offerings, also known as “mini-IPOs,” launched in 2015.) Stratifund uses a proprietary algorithm, based on five broad criteria, to rate offerings on a scale of 0 to 5.
As of November 21, 2016, Stratifund rates ninety Reg CF offerings and eight Reg A+ offerings. I crunched the ratings to see which funding portals have the best-rated deals, on average, as shown in Table 1.
Wefunder has dominated the Reg CF crowdfunding market since day one. It currently has over 50 offerings, way more than any other portal, and it is the only portal with offerings rated 4 or higher by Stratifund – it has 10 of those 4+ ratings at this time.
About half of Wefunder’s offerings feature the relatively new SAFE (simple agreement for future equity) security, which was pioneered by the Y Combinator tech accelerator in Silicon Valley. Wefunder’s other offerings are split roughly evenly among common stock, preferred stock, straight debt, convertible debt, and revenue sharing (a derivative of debt).
NextSeed’s offerings also have consistently high ratings, although its offerings use only debt and revenue-share securities, no equity deals.
Securities: Equity, Debt, Revenue Share
Of the 98 deals rated by Stratifund, a third use the SAFE security, another third use common stock, about 10 percent use revenue sharing, and the rest use convertible debt, straight debt, preferred stock, and LLC shares. Table 2 shows how the type of security figures into the Stratifund’s ratings of the offerings.
Categories: Market Data and Deal Flow