2021 KingsCrowd Market Intelligence Report
To access all the in-depth charts, data, and analysis of Regulation Crowdfunding (Reg CF) in 2021, click here to buy and download the full report.
Buy Full ReportA Little History
Startup investing through digital private market exchanges is a massive disruption to traditional venture capital (VC) practices. Before 2016 – when regulations made legal by the JOBS Act went into effect – startups could not seek investments from retail investors. Only institutions and extremely wealthy individuals had the ability to invest in startups. But that changed in 2016. Today there are dozens of equity crowdfunding platforms hosting hundreds of startup investment opportunities.
How Equity Crowdfunding Has Evolved
Online equity crowdfunding – or online startup investing – has grown enormously since 2016. (Note: this data only covers Regulation Crowdfunding raises)
- In 2018, $75.8 million was invested in startups. That figure grew by 541.8% to reach $486.8 million in 2021.
- The volume of deals also increased drastically from 2018 to 2021. In total, deal volume grew by 125% from 643 in 2018 to 1,448 in 2021.
Startups that use Regulation Crowdfunding (Reg CF) to raise capital must set a minimum funding goal for their rounds. If they don’t reach the minimum amount by the time the round is set to close, then the round is considered unsuccessful and the startup receives no capital. However, most equity deals are successful. In 2021, only 10.7% of equity-based rounds were unsuccessful. Debt-based funding rounds had a higher rate of failure – 32.6% in 2021. More than two-thirds of debt deals closed successfully.
Another major benefit of online startup investing is that it enables investors and startups outside of venture capital (VC) hubs like Silicon Valley and New York to find each other. While KingsCrowd does not collect data about the locations of individual investors, we do track where startups that raise capital online are based or incorporated. KingsCrowd monitors this data to see if online startup investing increases access to capital beyond the traditional VC geographic locations. While California still dominates in terms of total dollars invested, southern states have shown impressive funding growth since 2018. (Note: U.S. regions are based on designations from the Census Bureau).
To learn which industries performed best on which platforms as well as the representation of female and minority founders across platforms, click here to buy and download the full report.
A Look at Founder Demographics
Traditional venture capital (VC) has earned a reputation for overlooking non-white and non-male founders. In 2020, minority founders received only 2.6% of venture funding. Similarly, only 2% of VC investments went to women founders in 2021. While the figures are slightly better for teams with both female and male co-founders – 15.6% – it's still clear that many VCs are passing on diverse founding teams.
That bias does not persist in online startup investing. Because online equity crowdfunding is open to everyone, all founders have an opportunity to reach an inherently diverse investor base. As a result, women founders and minority founders saw much higher percentages of total funding in the online private markets.
- Startups with women founders made up 34.1% of all equity-based deals in 2021. These startups received 19.3% of total dollars invested in equity-based deals.
- Startups with minority founders made up 44.6% of all equity-based deals in 2021 and received 31.5% of total dollars invested.
Impact Investing in Online Startup Deals
Impact investing – an investing strategy that takes social and environmental impact into account – is a growing phenomenon in both the public and private markets. Investors in the online private markets can find mission-driven companies that are trying to address climate change, reduce inequality, donate revenue to worthy causes, or otherwise improve living conditions. While these startups do not make up the majority of investment opportunities, they do find ample support from investors.
Online Startup Investing in 2021
In 2021, startups within both the media, entertainment, and publishing industry and the financial and insurance products and services industry received more than $52 million in investments. These two industries together account for nearly a quarter of total dollars invested last year.
While there are dozens of equity crowdfunding platforms that connect startups with individual investors around the country, the market is dominated by a few major players.
Wefunder, StartEngine, and Republic accounted for nearly 85% of dollars invested in 2021 and 78.8% of total deal flow.
To learn which industries performed best on which platforms as well as the representation of female and minority founders across platforms, click here to buy and download the full report.
Online Startup Investing Market Forecast
Online startup investing has seen phenomenal growth since 2018. There is clear market demand from retail investors to invest in startups, and there are no signs indicating that demand will end or decrease in the coming years.
KingsCrowd estimates that the online startup investing market will see compound annual growth of 50% over the next three years. By 2025, the market is likely to exceed $2 billion in annual investments.
The Role of KingsCrowd
KingsCrowd was founded in 2018, just two years after online startup investing became legal. KingsCrowd's mission is to empower investors of all backgrounds to make informed, data-driven investment decisions. To fulfill that goal, KingsCrowd provides educational resources, discovery tools, and both qualitative and quantitative ratings on equity-based startup investment opportunities. All of these tools and services combine to give investors actionable and data-driven insights for online startup investing. KingsCrowd also uses its detailed database to observe and provide market-level analysis of online startup investing.
KingsCrowd ensures that investors never miss out on promising private market investments while eliminating hours of work spent searching for and vetting deals. For more information, visit KingsCrowd at kingscrowd.com, LinkedIn, or Twitter.
Still curious?
The full 2021 KingsCrowd Market Intelligence Report enables you to:
- Discover key industry trends
- Make more informed strategic planning decisions
- Easily build competitive intelligence
- Better understand how the space is evolving
The 2021 KingsCrowd Market Intelligence Report contains:
- More than 60 unique charts and tables
- Comprehensive data on the performance of all platforms and industries tracked by KingsCrowd
- Assessment of both equity raises and debt raises in 2021
Buy and download the 2021 KingsCrowd Market Intelligence Report to learn:
- The average investor check size for women founders
- The top platforms in each U.S. region
- Percentage of successful raises
- Startup valuation trends
- And more
