Both online startup investors and founders have likely noticed that investment volume and deal activity have been sluggish compared to the peaks of 2021. This trend isn’t unique to the online investment crowdfunding market — Venture Capital (VC) has also experienced a pullback in both deal count and investment volume since 2021. This week’s chart of the week examines how VC and Reg CF (Regulation Crowdfunding) trends compare and provides year-end projections for regulated investment crowdfunding.
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Although investment crowdfunding has slowed since its 2021 peak, Reg CF has proven more resilient than VC in terms of both investment dollars and deal count when normalized to 2018 values.
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From 2018 to 2021, normalized capital raised for Reg CF grew by 5.6x, while Venture Capital increased by 1.4x.
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Looking ahead to year-end 2024 estimates, Reg CF is expected to finish at 4.4x its 2018 investment dollar volume, while VC is projected to reach only 1.3x its 2018 value.
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Part of the reason for Reg CF’s larger relative growth is that U.S. VC investment is still approximately 572 times larger than Reg CF: $187 billion vs. $327 million (estimated 2024 values), respectively.
Massive VC Rounds in AI may be masking overall VC activity
According to PitchBook’s Q2-2024 data for U.S. VC investments, VC quarterly investment dollars hit an 8-quarter high of $55.6 billion. However, this surge was driven by a few massive AI deals—CoreWeave raised $8.6 billion, and xAI secured $6.0 billion in Series B funding. Together, these two deals alone made up 26% of the total Q2 VC value.
This suggests that broader VC markets outside of AI might be struggling more than the overall 2024 numbers indicate.
While it seems that Reg CF will finish 2024 lower than 2023 and VC might end higher, this data could be skewed by these types of large AI fundraising rounds, which haven’t similarly impacted online investment crowdfunding markets.
What is driving the pullback in startup investment activity?
While 2021 set the high-water mark for both Reg CF and VC investments, both markets have seen a pullback in recent years. The Federal Reserve’s rate hikes, intended to combat rising inflation, have likely played a significant role in cooling the capital-raising and startup investing landscape.
One major factor is that investors can now earn 4.5-5.0% in a liquid, risk-free savings account. This has shifted capital toward safer, lower-risk assets, as investors opt for these higher yields without the added risk of startup investments.
In times of macroeconomic uncertainty, investors may have less capital available for startups, either due to job losses, inflation-driven higher living costs, or simply wanting to maintain a larger cash buffer in case of emergencies. This further constrains the flow of capital into early-stage companies.
Moreover, investors have been gravitating toward startups with traction, especially those closer to break-even or already profitable. Valuations have also corrected to put more emphasis on businesses with real traction. This has prompted some founders to defer their fundraising efforts in hopes of hitting stronger metrics before approaching investors again — especially when those founders are trying to get equal or higher valuations than their prior round.
Lastly, the tough economic climate of 2022-2023 led to the closure of many startups. As a result, some investors are exercising greater caution, waiting to see how their existing portfolios perform before committing fresh capital.
Regulation Crowdfunding (Reg CF) Investment Trends: 2018-2024
Based on current trends, Reg CF is expected to close out 2024 with approximately $330 million raised and 1,380 investment offerings.
This 2024 projection is about 23% lower than the previous two years, when Reg CF saw around $423 million invested in both 2022 and 2023. However, this amount is still approximately 4.4x the 2018 value.
Debt crowdfunding is likely to end very near it’s 2023 investment volume, perhaps even increasing a little to end 2024 around $44 million invested if it maintains its current pace.
| Year | Debt | Equity | Annual Total | Deal Count |
| 2018 | $ 17,417,550 | $ 57,403,766 | $ 74,821,316 | 649 |
| 2019 | $ 8,329,057 | $ 90,873,763 | $ 99,202,820 | 542 |
| 2020 | $ 12,975,922 | $ 196,158,798 | $ 209,134,720 | 1045 |
| 2021 | $ 32,657,370 | $ 463,485,410 | $ 496,142,780 | 1478 |
| 2022 | $ 35,051,466 | $ 389,530,271 | $ 424,581,737 | 1492 |
| 2023 | $ 43,507,352 | $ 379,261,500 | $ 422,768,852 | 1449 |
| 2024 (thru Sept.) | $ 31,241,358 | $ 200,883,100 | $ 232,124,458 | 980 |
| 2024 Est. | $ 44,000,000 | $ 283,000,000 | $ 327,000,000 | 1380 |
The deal count is also estimated to end 2024 around 1,380 offerings, which would be a ~5% decline from 2023 values. This suggests that while there is a small decline in the number of offerings, the bigger impact on the reduction in 2024 investment volume are the average capital raises per campaign.
