The last couple of months have been a turbulent time for the financial sector. In March, we first saw the collapse of Silicon Valley Bank, the largest bank by deposits in Silicon Valley and favored by tech startups. This was followed a couple of days later by the collapse of Signature Bank. The third collapse this year was that of First Republic Bank, the largest banking failure since the financial crisis in 2008. These events have been coupled with stagnation in the venture capital market that has highlighted the stability of the investment crowdfunding industry. Ultimately, April demonstrated a resilient interest in investment crowdfunding.
Investment Crowdfunding Proves Appetite for Deals
In a recent newsletter, Sherwood Neiss, Principal at Crowdfund Capital Advisors, was quoted saying, “A large amount of capital and number of investors flowing into Investment Crowdfunding offers proves that there is a massive appetite for these deals.” Neiss continues, “While there might have been fewer deals in April, the reality is startups still need capital, and Investment Crowdfunding is where they will find it. We expect to start to see an uptick in deals in May as these issuers realize opportunity exists here.”
Investment Crowdfunding Sees a Decline in New Deals, Rise in Capital Commitments
In April, there was a decline in new deals, with only 91 being launched, compared to 147 in March 2023. This marked the lowest number of crowdfunding deals since June 2020. However, capital commitments reached an impressive $65.4 million in April, the second-highest level of commitment since March 2021, when investment crowdfunding was reaching a high point of interest during the pandemic.
There were also 54 issuers that raised over $1 million each during April, while six raised the maximum of $5 million. With the 54 issuers that closed their raise during the month bringing in an impressive $131 million, it was the second-highest monthly close of capital, despite ongoing challenges faced by the private capital markets.
More Investors are Making Investment Decisions
The number of checks written by investors in April 2023 increased by 92.9% compared to the prior month but dropped by 4% compared to the prior year. The average check size dropped to $1,174 in April 2023 due to a large number of active deals compared to March.
The investment crowdfunding industry is growing rapidly and shows no signs of slowing down. As investors become more comfortable with deploying capital in private markets, despite current challenges in the private market, it will only continue to fuel this growth trend.