New year, new deals, new data. With the first month of 2023 finished, the year has started with a hopeful note. The Federal Reserve approved a slightly smaller interest rate hike this time around (0.25% as opposed to December’s 0.5%), and many expect 2023 to bring a drop in inflation. January ended with the crypto market rallying and the public market closing out with more gains.
But what about online startup investing? Last month, we covered the stats in the online private market for the fourth quarter of 2022. Today, we’ll go into stats for January 2023.
In January 2023, a total of around $28 million dollars was invested across Regulation Crowdfunding (Reg CF) and Regulation A (Reg A) raises. Reg CF equity deals received $21.1 million, Reg A accumulated $5 million, and Reg CF debt deals earned $1.9 million.
For Reg CF specifically (equity and debt), this is a 35.1% drop from January 2022. However, compared to December 2022, this is a 10.1% increase. Considering macroeconomic factors, this trend makes sense. During the second half of 2021, a lot of companies — especially those in the tech sector — soared in growth. Investors’ confidence likely carried over to the beginning of 2022 and resulted in a strong January. Later in 2022, though, the American economy was suffering. Inflation reached its highest point in four decades. As so many investors became more conservative with their capital, both the private and public markets faltered. And it makes sense that investors are continuing to be cautious since a full economic recovery is far from guaranteed right now.
Among equity deals, the most funded industry was the transportation, automotive, aviation, and aerospace category at $3.9 million. I think a lot of those dollars went to companies in the electric vehicle (EV) sector. The EV industry is growing at a rate of 25.4% in the U.S, fueled by federal incentives, more models being created due to the rising popularity of EVs, and the demand for cleaner energy.
In the debt deal corner, Mainvest was the top platform, at $1 million. Here’s some perspective on how impressive that is: Wefunder, the top debt-raising platform for the fourth quarter of 2022, raised $1.7 million in debt at the time. Mainvest brought in more than half of that in just one month.
Unsurprisingly, the top industry for debt raises in January 2023 was food, beverage, and restaurants. Most debt raises we see at KingsCrowd are single-location restaurants or breweries that want to expand and provide a return quickly to investors — something investors undoubtedly appreciate in economically turbulent times.
The rise in debt deal investments is likely due to investors looking for more predictable investment opportunities in the midst of market volatility. Debt is typically considered less risky than private equity investments. It has fixed terms, a clear rate of return, and a predetermined time period. Meanwhile, equity deals have higher risks with greater potential for high returns.
The first month of online startup investing in 2023 was much like many Januaries. The effects of the old year still lingers, but hints of change are already sprouting. Investors remain cautious, yes. But Reg CF and Mainvest’s success compared to the end of 2022 might be a sign of growing optimism, perhaps influenced by the promise of lower inflation. Spring is coming — for 2023 and maybe for online private investing, too. We look forward to finding out.
Note: All data on online startup investing used for the Chart of the Week comes from the KingsCrowd database and represents a snapshot of the US crowdfunding market.
“Platform” is defined here as the SEC-registered intermediary (broker-dealer or funding portal), or if none, the primary non-broker or non-funding portal platform conducting the offering.
Wall Street has Morningstar, S&P, and Bloomberg
The equity crowdfunding market has KingsCrowd.
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.