Crowdfunding of stocks — or community raises, as the fundraising platforms involved prefer to call them – has grown steadily in recent years. Regulations governing the process continue to evolve in favor of the market, and the withdrawal of venture finance in 2022 may be the last piece needed to appease the naysayers of the fundraising strategy for good.
This year looks set to be a landmark year for equity crowdfunding, which involves raising capital through specific filings with the US Securities and Exchange Commission, including Reg CF and Reg A, from a mix of non-accredited investors.
In recent years, equity crowdfunding has removed much of the stigma that used to suggest that only companies not good enough for VC raised this way. Some traditional VCs have even scouted the platforms or encouraged their portfolio companies to continue the process. But with the fundraising climate showing cloudy skies, equity crowdfunding is gearing up for a field day.
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According to the Arora Project, a platform owned by the Republic that manages crowdfunding initiatives and tracks data, more than $215 million has been invested in startups on equity crowdfunding platforms this year through the end of May, up from about $200 million in the same period last year. Crowdfunding campaigns have raised a total of $502 million in 2021.
While that’s not too much of a jump, industry players are encouraged by the growth and see room for more improvement later in the year, as crowdfunding typically picks up around Q4.