Crowdfunding has significantly impacted the startup marketplace over the last several years, and there are no signs of its influence slowing down. Crowdfunding has grown into a top-of-the-list mode of equity investing. Equity crowdfunding has become a popular means for startups to share their company name, mission, vision, and other aspects directly with investors that are ready and waiting to contribute capital to a promising and innovative business.
What the Data Has to Say About the Growth and Future of Equity Crowdfunding:
In 2017, after Title III of the Jobs Act was enacted, Regulation CrowdFunding entered its first year, which began the growth and future of Equity Crowdfunding.
KingsCrowd reported that crowdfunding campaigns accumulated over $74 million in 2018. Over $100 million was reportedly raised in 2019. Even during the tough financial year of 2020, the crowdfunding industry reported $211 million raised. In fact, the year of 2021 showed a 2.4 times increase in crowdfunding investments, which came in at over $500 million.
Data reflecting this rapid growth shows a sharp upward trajectory for this newly popular investing medium. The impact of crowdfunding investing is predicted to come in at $196.36 billion by 2025, with a compound annual growth rate of more than 15%.
Breakdown of Investments Raised by Crowdfunding Platforms:
The data tracked by KingsCrowd in 2021 also depicts impressive growth within individual crowdfunding platforms.
Wefunder alone raised $186 million in 2021 at 37% of the market share, a 33% increase from 2020. Also, more than $5 billion in venture investment capital has been invested in companies initially funded on the Wefunder platform. Wefunder has also funded 12 startup companies currently worth more than $100 million; this also includes four companies currently worth more than $1 billion.
This growing success is happening on other crowdfunding platforms as well.
- StartEngine raised $136 million at 27% of the market share.
- Republic raised $93 million at 19% of the market share.
- Netcapital raised $26 million at 5% of the market share.
- SeedInvest raised $11 million at 2% of the market share.
- MainVest raised $10 million at 2% of the market share.
Other crowdfunding platforms totaled $40 million raised at 8% of market shares. The investment volume per platform, combined to total $502 million raised in 2021.
Crowdfunding and QSBS Eligibility
This drastic growth in crowdfunding has many implications for the investing marketplace and the startup ecosystem. This rise can result in more startups making it off the ground with solid investment capital to back them through all stages of growth. The new paths paved by this growth in crowdfunding can help contribute to a more equitable future for individual startups and the national economy on the whole.
Partner with CapGains
Equity investments made on many of these crowdfunding platforms can qualify for QSBS tax exemptions. It’s imperative for investors and financial advisors to perform initial and continious research on investment stock eligibility under Section 1202 because the tax code is highly nuanced.
Here at CapsGains, we want to help make the process of determining QSBS eligibility as successful and streamlined as possible over the lifetime of your investment stocks.
Have questions about the eligibility of your crowdfunding investments? Contact us today!
This article does not constitute legal or tax advice. Please consult with your legal or tax advisor with respect to your particular circumstance.