Thursday, February 18, 2016

Crowdfunding Platforms 2016 update

Here is the update on crowdfunding for which you have been patiently waiting.

      In 2015, Crowdfunding raised over $34 billion through over 1200 (!) crowdfunding platforms around the world.  I haven't been able to track down all of these platforms, but has a pretty good list.  I have integrated information from several sources to update the crowdfunding list (see tab above) on this blog.  I focused on the USA this time, although there are a few international platforms in there as well.  The updated list here includes over 375 crowdfunding related sites.

For background: In October of 2015, the SEC passed Title III of the JOBS Act. (It only took 4 years, but at least it is something.)  It is not clear what the ramifications of this will be, but here are a few recent developments to note:

  • As of Jan 29th, crowdfunding sites are supposed to register with the SEC and be a member of FINRA.  
  • As of May 16th, 2016, companies can solicit equity crowd investment from non-accredited investors.   
  • The amount an unaccredited investor can invest is NOT unlimited.  Here is the table of investment limitations provided by the SEC: 
income sample table
  • Firms must disclose certain financial information depending on the amount raised.  Here is the SEC summary (see for full details):

Tiered financial disclosure.  The minimum level of financial disclosure required by the company             depends on the amount of money being raised or raised by the company in the prior 12 months:
  • $100,000 or less – financial statements and specific line items from income tax returns, both of which are certified by the principal executive officer of the company.
  • $100,000.01 to $500,000 – financial statements reviewedby an independent public accountant and the accountant’s review report.
  • $500,000.01 to $1 million – if first time crowdfunding,then financial statements reviewed by an independent public accountant and the accountant’s review report, otherwisefinancial statements audited by an independent public accountant and the accountant’s audit report.

A recent Forbes article argued that crowdfunding could top VC in the next couple of years.  Just as a comparison - crowdfunding hit $9 billion in the USA while VC funding topped over $47 billion last year (pwcmoneytree). We aren't there yet, but clearly crowdfunding is a force to be reckoned with.