Industry Analysis - October 6, 2021

How Long Until the Next Funding Round?

Startups usually need quite a bit of capital to get off the ground. And that capital frequently comes from subsequent funding. Many companies raise multiple rounds via private equity crowdfunding — which is good news for investors who may have missed out on early rounds in a company they like. But how long do startups wait before raising additional capital online?

We examined 287 Regulation Crowdfunding and Regulation A deals that were repeat rounds of funding for companies. All of these rounds were either currently active or closed between January 2018 and September 2021. We bucketed the duration between raises into six month increments.

Time Gap Between Repeat Equity Crowdfunding Rounds

Across the repeat funding rounds that KingsCrowd has tracked, all of them took place within two years from the previous round. Around a third of companies waited six-to-12 months between raises. Interestingly, this wait time closely mirrors traditional venture capital repeat raises. The second most popular wait time was between 12-to-18 months while 42-to-48 months was the least common duration between raises. 

The gap between raises generally widens in later stages as companies begin to sustain operations with inbound revenue. Thus, early stage startups raise more frequently than growth stage companies. The product type could also affect the time between raises. Companies that need to spend heavily on research and development — such as pharmaceutical or hardware companies — may need to raise multiple rounds in a shorter time frame. Investors can take these factors — company development stage and product type — into account when assessing whether a company will likely pursue future funding rounds and how long the time gap between raises may be.

Note: all data used for the Chart of the Week comes from the KingsCrowd database and represents a snapshot of the crowdfunding market.

About: Yasmin Sharbaf

Yasmin is passionate about the intersection of business, art, and science. Prior to KingsCrowd, Yasmin worked on a cryptocurrency investing research project for Wellesley College Investment Office where she assessed the risks and rewards for university endowment investment into cryptocurrency. She has also previously worked in a neuroscience lab studying language and memory of songbirds. Yasmin’s dream is to make investing and financial education accessible to everyone. In her free time, Yasmin enjoys going on adventures, learning new languages, and exploring different cultures. Yasmin studied Neuroscience and Studio Art at Wellesley College.

View more articles by Yasmin

Other Articles

New Deals for the Week Ending 03/15/2020

Here are the latest equity crowdfunding raises begun this past… ...

Sector Spotlight: Entertainment

Startups usually need quite a bit of capital… ...

New Deals for the Week Ending 4/10/2020

Startups usually need quite a bit of capital… ...