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EARLY TRENDS IN EQUITY
CROWDFUNDING

THE FINAL RULES IMPLEMENTING THE
EQUITY CROWDFUNDING PROVISIONS
OF THE JOBS ACT WENT INTO EFFECT
IN MAY 2016.
We examined a number of the first
crowdfunding offerings to see what early
trends, if any, exist.

DATA SOURCE
U.S. Securities and Exchange Commission
EDGAR online filing system
First 100 crowdfunding campaigns filed
Spanning from May through September
2016

MANY INDUSTRIES ARE USING
CROWFUNDING
Mobile App/Internet
Services is largest segment
Professional Services,
Beer/Spirits and Hospitality
also had strong showings
Almost all industries,
(including non-profit and
energy sectors) were
represented

Regardless of industry, approx. 60% of
the offerors had been in business for
1 year or less. A staggering 85% of
offerors had been in business for 5
years or less. A significant majority of
businesses were in the startup and
pre-revenue stage with 70% having
annual assets of $100,000 or less.
These trends are consistent with what
one would expect and the purpose of
the JOBS Act in creating an avenue for
startups and newer businesses who
are not ready or able to access
traditional capital markets.
MORE TRENDS

EQUITY
Over 50% of crowdfunding campaigns offered equity
Common stock (or LLC membership units) was the
predominant type of security offered
The strong preference (about two-thirds) was to
offer non-voting equity
In preferred stock offerings, a liquidation preference
was the most frequent right and preference offered

DEBT
Approximately one-half of the debt offerings were
revenue-sharing notes that offered purchasers a
return of between 1.5X to 2X on their investment
Term notes and convertible notes comprised the
remaining half of debt instruments offered
Most common annual rate of interest: 5-6%
Term of note: Widely varied (12 mos. - 12 yrs)

SIMPLE AGREEMENT FOR EQUITY
Simple Agreements for Equity (SAFEs) were the most
common type of convertible security, allowing
holders to convert their SAFE into preferred stock at
the next financing of the offeror (or into common
stock if additional financing was not secured)
Discounts on next round pricing commonly ranged
from 20-25%
Valuation caps ranged between $1.5-$4 million

APPROXIMATELY
ONE-HALF OF THE
CROWDFUNDING
CAMPAIGNS
SURVEYED WERE
AIMING TO RAISE A
MINIMUM TARGET
AMOUNT OF
$50,000 AND 80%
HAD A MINIMUM
TARGET AMOUNT
OF $100,000 OR
LESS
Up to $1 Million can be raised

POSSIBLE EXPLANATIONS FOR
LOW TARGET AMOUNTS
Attempting to stay below the thresholds that would
have required more detailed ongoing financial
reports to investors
With all-or-nothing stakes, setting the bar low
enough to ensure a successful result
Using crowdfunding campaign to supplement
traditional seed round already underway

RANGE OF FEES
19 crowdfunding portals
currently registered with
SEC
Transaction fees ranged
from 3-10% of the total
amount raised through a
campaign
3%��(1)
5%��(5)
67%��(3)
8%��(2)
10%��(3)
(x)��is��the��no.��of��portals��in��that��fee��range

THE CROWDFUNDING PORTAL
WITH THE LOWEST FEE
(WEFUNDER @ 3%)
HOSTED
NEARLY 40% OF ALL
CROWDFUNDING CAMPAIGNS

The quality of investor disclosure
documentation varied greatly. Most
businesses used the SEC's Q&A
format for disclosures over the more
traditional private placement
memorandum.
DOCUMENTATION

THE EARLY RESULTS
For equity crowdfunding campaigns that opened in
May 2016 and closed within 90 days, only 28% were
able to reach their crowdfunding goal but many
exceeded their minimum target for funding
The success rate for rewards-based crowdfunding
(Kickstarter, GoFundMe, etc.) is approx. 33%
Early indications are that rewards-based vs equity
crowdfunding success rates may be comparable

A FEW SUCCESSFUL
CAMPAIGNS
Issuer Business Type
Minimum
Target
Amount
Raised
Exemplars Internet/Mobile App $50,000 $54,620
Youngry Internet/Mobile App $50,000 $69,920
MobileSpike Commercial Product $50,000 $92,000
EveryFit Medical Device $50,000 $100,000
N1CE USA Beer / Spirits $50,000 $101,386
Sam Lee Laundry
Collective HTX
Native Hostel Austin
Cleveland Whiskey
Beta Bionics
Entertainment $50,000 $476,851
Co-Working Space $150,000 $230,500
Hospitality $275,000 $396,500
Beer / Spirits $100,000 $731,164
Medical Device $50,000 $1,000,000

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