Returning to Reg CF: Understanding Multiple Offerings - KingsCrowd

September 19, 2019

Returning to Reg CF: Understanding Multiple Offerings

 

Any day now, my wife is due with baby boy number 2 AND baby boy number 3, which, in parenting parlance, will officially make me a “Parent of Multiples.” Will we go the Hollywood route, like Dylan and Cole Sprouse, Blake and Tommy Tuomy-Wilhoit, and Mary-Kate and Ashley Olsen? Do I have to worry about notes from their teachers years from now about them pulling “twin-swap” shenanigans? Will I be able to tell them apart? Who knows. What I do know, is that in honor of this upcoming event, today we’re looking at what I’m calling “multiple offerings”, or firms who have launched more than one offering under Reg CF.

Like twins, “multiple offerings” are not an incredibly common occurrence. Only 5% of firms in our data (59 firms) have gone on to issue subsequent Reg CF offerings so far, with all of the offerings of those companies accounting for only 11% of the sample (125 offerings). So let’s take a look at a breakdown of these offerings by the numbers:

Number of Offerings:

With 59 firms in the sample, it makes sense that we have 59 “first time” offerings. And with a definition of “more than one”, it should also not be a surprise that we have 59 “repeat” (2nd) offerings. It is with the 3rd and 4th offering that these numbers fall off a bit, with only 5 firms going back for Round 3, and to-date, only 2 firms putting a 4th offering out into the Crowdfunding universe, including this company you may have heard of, KingsCrowd.

Target Amount:

On average, the first offering is where these companies seek their largest investment, with an average minimum of $39K. This number drops $11K for offering number 2 to $28K. This falls again slightly for offering #3 ($26K), before a bounce back for our 4-timers to $30K

Success Rate:

If you’re a company returning to the Reg CF well, it’d be a reasonable assumption that it worked well for you the first time around, which is what we see play out in the data. 73% of companies hit their target amount the first time around. On the second offering, this number dips to 61% (although 13 of these second time offerings are still live, so that number has a chance to increase down the line). When we get into our smaller sample of 3rd and 4th time offers, the success numbers are 80% and 50%. And that other 50% of 4th time offers (WeStrive), has been live for only 2 weeks with 3 months left to go. So they data shows that those who find success the first time around continue to successfully utilize RegCF for future offerings.

Amount Raised:

In the first go-round, these companies raise an average of $154K. This number falls to $93K for offering number 2 (though remember, a number of these offerings still have some time until they close). But similar with the success rates of Offer #3, we see this amount bounce back to $147K for the 3rd offering. And our smaller sample of two 4th time offerings shows a smaller average, though it is hard to extrapolate from a sample of two. I will point out that KingsCrowd is on pace to outperform its prior three offerings, so…4th times a charm?

Offering Platforms

This is where some interesting data spits out. We’ll be having babies 2 and 3 in the same hospital as our first little guy. To keep the analogy going, we’ll call the offering platforms the “hospital” that these offerings are being delivered at. And it appears some people prefer their first hospital more than others. Of platforms that hosted more than 1 initial offering, StartEngine is the platform that retains most of the business for the 2nd (and 3rd and 4th) offering. Of the 34 “first” offerings, StartEngine keeps 82% of that business (28 offerings). But where do people go when they want a change of scenery? That would be Wefunder, who picked up offerings from 11 companies looking to switch from their prior platform. 


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About: John Aland

John is an Accounting PhD candidate at the University of Michigan’s Ross School of Business. His research interests include crowdfunding, disclosure, and debt contracting. Prior to Michigan, he worked as an auditor at KPMG in Philadelphia for seven years, leaving the firm as an audit manager. John has a BS in Accountancy from the University of Notre Dame. He can be reached at alandj@umich.edu.

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