Chart showing success of follow-on Reg CF funding rounds

Today’s Chart of the Week delves into the data surrounding follow-on Reg CF raises (i.e. companies who have completed multiple Reg CF funding rounds), highlighting trends and insights from the past few years. Since January 2021, we’ve tracked 352 follow-on raises, revealing that 72% of these rounds raised less capital than their previous funding rounds. Let’s explore data and potential underlying factors that may have influenced these outcomes.

  • Since January 2021, there have been 352 follow-on Reg CF raises.
  • Of those raises, 253 of them raised less capital than the prior round (72%). 99 of those raised more capital than the prior round (28%).
  • The median follow-on round raised 49% of the prior round – meaning that half of all follow-on issuers only raised half of their prior Reg CF funding round amount.
  • This indicates that companies that previously raised a Reg CF round tend to have trouble raising similar amounts in follow-on raises.
  • This could be due to a variety of factors, including higher or un-adjusted valuations, failure to achieve milestones, and decreased financial performance. 
  • Additionally, the period from 2021-2024, including the aftermath of COVID-19 and low interest rates in 2020-2021, may have contributed to the difficulty companies faced in raising similar amounts in follow-on Reg CF raises.
  • However, the average follow-on round raised 150% of the prior round. This suggests a skew in the data where most issuers tended to raise less (median), but for those who did raise more, they raised considerably more.
  • Notably, 45 raises were over 200% higher than the prior round. This indicates that while the vast majority of companies raise less in subsequent rounds, it is certainly possible for companies to launch and execute a successful follow-on campaign.

Timing Considerations: The 2021-2024 period that this dataset covers was marked by significant economic shifts. The initial surge in capital availability due to low interest rates in 2020-2021 may have set high benchmarks for subsequent raises. The subsequent economic recovery phase and shifting investor priorities likely made it harder for issuers to replicate their initial fundraising success. For founders, this underscores the importance of considering broader economic conditions when planning online fundraising strategies.

Investor Priorities: Retail startup investors should take note of the shifting priorities in the market. The focus in 2023-2024 has been moving away from growth-at-all-costs towards a greater emphasis on valuation, profitability, and sustainability. Investors are becoming more discerning, prioritizing startups with strong financial performance and realistic growth projections. This change in investment strategy highlights the need for startups to adapt by demonstrating solid business fundamentals and a clear path to profitability.

While only 28% of issuers raised more in their follow-on raise, the top raises were able to raise considerably more than their earlier round. This again indicates that issuers with strong financials and growth can successfully execute follow-on raises even in tougher macroeconomic conditions.

Company Name Prior Round Date Prior Round $ Raised New Round Date New Round $ Raised Increase
Linen 1/16/21  $27,472 10/13/21 $4.9M 178X
Rentberry 2/9/23 $242,908 11/14/23 $4.76M 16.6X
SMART Tire 4/29/22 $81,898 4/29/24 $1.17M 14.2X
Harmony Turbines 3/19/22 $206,692 3/13/23 $1.98M 9.6X
PvP 10/26/21 $327,437 4/30/22 $2.97M 9.1X
Jetoptera 11/8/22 $205,634 4/11/24 $1.48M 7.2X
CIRQ+ 6/29/22 $12,750 4/30/23 $68,715 5.4X
Kliken 8/3/23 $106,161 4/29/24 $563,123 5.3X
Rayton 12/28/22 $128,712 4/29/24 $676,548 5.3X
MentalHappy 8/22/22 $10,719 7/31/23 $50,500 4.7X