Online startup investing has become more prevalent in recent years as the JOBS Act exemptions continue to evolve and grow more popular as a way of raising capital for private companies. This is evidenced by the growth seen in the number of new raises occurring each year and the amount of money raised. These trends are incredibly positive for the future development of the online private equity markets. JOBS Act exemptions are incredibly powerful in allowing businesses to raise needed capital while providing investment opportunities to investors that would not have been possible otherwise. This blog will discuss why this is growing in popularity and its benefits.
The Growth of Online Startup Investments
Online startup investing has grown significantly in the past few years, with more money being raised for private companies through an online portal. From 2018 to mid-2021, there was a 327% increase in the number of companies raising funds and a 472% increase in money raised. This trend is only projected to continue in the coming years as online private equity markets grow. This number of new raises is exciting; it will only continue to open new opportunities for investors and companies alike, create jobs, and leave a positive impact on the economy.
There are a few factors that have contributed to this rapid growth. Firstly, the new $75 million and $5 million raise limit that went into effect in March 2021 for Reg A+ and Reg CF has made it easier for companies to raise capital and expand capital raising to companies for whom previous limits weren’t high enough. Looking forward, the increasing number of raises is an incredibly positive trend for the private capital market.
An Increase in Online Business Investment
In 2021, the amount of money raised through Regulation CF surpassed $1 billion, a figure expected to exceed $5 billion raised because it is a promising opportunity for companies and investors. For companies, regulation crowdfunding is an efficient way to raise money as allows companies to retain more control than traditional methods. At the same time, investors can benefit by getting involved in early-stage startups and have the potential to see a return on their investment if the company is successful. This is one of the key benefits of JOBS Act exemptions; no longer are the everyday investor locked out of deals in the private market. Regulation CF offerings are open to non-accredited and accredited investors alike, removing the barrier to entry in this space.
While the number of raises is quickly increasing, growth in the amount of money raised from the beginning of 2018 to the first quarter of 2021 is similarly astonishing. The amount of capital raised in this period increased by 627%, from $15.5 million in 2018 to $112.8 million in 2021.
Equity crowdfunding is proving to be a promising opportunity for companies looking to raise capital and for investors looking to get involved on the ground floor of young startups. The steady increase in the number of raises and amount raised is an extremely positive indicator for future growth in the online private equity markets. For these reasons, we expect the amount invested in online startups to continue through 2022 and beyond.
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