With the April 15 tax deadline looming, startup investors are wise to consider the potential holding periods of their investments. How long will it take before you see a taxable event like an exit or failure?

We analyzed 256 investment crowdfunding exits and failures, revealing an average holding period of 2.5 years (median: 2.3 years) since a company’s first online capital raise.

Average Investment Crowdfunding Holding Periods in Years to Exit

From an analysis of 256 investment crowdfunding exits and failures to date:

  • The average investor in a crowdfunded company waits 2.5 years before an exit or failure (median: 2.3 years).
  • 14% of exits (35) happen within a year of the initial investment, potentially resulting in short-term capital gains.
  • The majority of exits and failures (86%) occur after the one-year mark, potentially allowing for more favorable long-term capital gains treatment.
  • Only 4% of exits (11) have taken longer than 5 years to date. This number is expected to increase as the investment crowdfunding industry matures, since angel investment and VC data suggests that larger exits with >5X returns can take 8 years or more on average.
  • Surprisingly, IPOs and M&A exits, typically associated with positive outcomes, have shown shorter holding periods than most negative outcomes (except for “Shut Down Business”).
  • Crowdfunded companies that IPO (crowdfunded IPO performance here) have the shortest average holding period – just 2.3 years between their initial crowdfunding raise and IPO (or only 6 months from their last raise to IPO). This suggests that investment crowdfunding is often being used as a bridge round before a planned IPO.
  • Given the young age of the investment crowdfunding industry (median Reg CF company is only 2.3 years old), we expect to see more positive exits with longer holding periods as it matures.

Pro tip: looking for an easy way to track and manage your portfolio exits and failures? While updates directly from companies are the best source of information, KingsCrowd also has our exit and failure tracker and tax center to help investors assess whether any portfolio investments may have had taxable events.