Greetings, Agents of Impact! Featured: ImpactAlpha Original
New crowdfunding rules set to boost investment in diverse startups and founders. The SPAC craze is one reaction to the costly and fraught process of taking a company public (see Dealflow, below) . A less flashy capital-raising innovation is quietly gaining traction: investment crowdfunding. New U.S. Securities and Exchange Commission rules that go into effect today increase the amount that entrepreneurs can raise from customers, supporters and the broader public from $1.07 million to $5 million. Since the advent of “regulation crowdfunding” under the Jumpstart Our Business Startups, or JOBS, Act, four years ago, some 800,000 investors have committed more than $800 million across 3,600 offerings (campaigns only collect the funds when they meet their minimum goals). The average raise: $350,000. Deals have accelerated despite (or because of) the COVID crisis. The new higher limits will “massively accelerate that growth,” Jonny Price of crowdfunding portal Wefunder writes in a guest post on ImpactAlpha . Price predicts $1 billion could flow to crowdfunded offerings in 2021, a four-fold increase over the past 12 months.
Some companies are crowdfunding in order to engage customers and share wealth more broadly, even when other capital is available. A BlocPower subsidiary is offering “climate notes” to finance energy projects in BlocPower’s client buildings via the RaiseGreen platform, which specializes in sustainable project finance (see, “ Brooklyn’s BlocPower raises $63 million to green U.S. buildings ”) . Crowdfunding can help diverse founders prove their investability. Before it could attract institutional investors, Native American Natural Foods raised $120,000 from 200+ investors (see, “ A Native food company’s commitment to social mission attracts investors at last ”) . Savers Village , a Black-led workforce housing project , is raising on real estate crowdfunding platform SmallChange to create tenant savings accounts that build wealth with a portion of each month’s rent. “The ability for socially-minded entrepreneurs to raise capital from ordinary people (not just millionaires and billionaires) who are passionate about the problem they’re tackling,” Price says, “is invaluable.” Global trend. In Europe, where investment crowdfunding first took hold, early stage VC firm Passion Capital is carving out £350,000 out of a £45 million ($62.7 million) fund for individual investors via crowdfunding platform Seedrs . African crowdfunding platform Raise is looking to ignite African-led crowdfunding across the continent (see, “ Microtraction backs African equity crowdfunding platform Raise ”).
Second rounds. […]