In the first three months that small business equity crowdfunding was allowed, only 17 of the 117 businesses that registered offerings on SEC-approved platforms met their minimum funding requirement, according to a NextGen Crowdfunding press release. By ‘small business equity crowdfunding’ I am referring to public offerings up to $1 million sometime referred to as “regulation crowdfunding” or “Title III crowdfunding” that were first approved by SEC regulations issued May 17, 2016.
What does this statistic tell us? I think that it points out two fundamental truths about the state of the crowdfunding market:
First, the managers of the firms that did not meet their goals would likely agree that more work is needed to strategize, package and communicate and market their offering to investors. Successful crowdfunding requires a systematic and comprehensive approach to “upping your game” to improve overall entity performance. This includes better accounting and reporting of performance data, better marketing, improved social media campaigns, and more buy-in from all stakeholders associated with these organizations.
Second, it means that U.S. investors still have long way to go before they have a logical means to evaluate and invest in such offerings. Without a systematic approach to evaluating such offerings, investments in this type of crowdfunding deals is nothing more than speculation.
I welcome the opportunity to discuss a crowdfunding strategy with business owners or investors who are considering incorporating this new approach to financial management.