The online startup investing market has been growing rapidly. From 2018 to 2021, startup investments grew from $75.8 million to reach $486.8 million, a 541.8% increase. This is also because the volume of deals grew by 125% during that period. The crowdfunding space is getting more popular as more founders open up their companies to the public — and as more people believe in founders and the potential returns on their investments.
But what specific industries have contributed the most to this growth? In this Chart of the Week, we looked at the top five industries with the highest funding growth between January 2020 and December 2021 for equity Regulation Crowdfunding companies.
According to our data, the beauty and personal care industry topped the chart with a growth rate of 446.7%. In one year, the amount raised jumped from $1.26 million to $6.88 million. This finding is surprising for the beauty industry as it had one of the lowest amounts raised in 2020. The second-highest was the marketing and advertising industry, which grew by 264%.
There could be multiple reasons for these drastic increases. There may have simply been so few raises in 2020 in these two industries that even a small increase made a significant difference. It is easier for an industry to grow dramatically when it goes from raising $1.26 million to $6.88 million than it is for an industry to grow by the same percentage when it’s already raised $20 million, for example. This could also mean that the amount raised plateaued after a certain amount. Another factor for the beauty industry is that more than 80% was raised by female founders. The crowdfunding space has historically empowered female founders, including in 2021. And so with more female founders raising capital in the beauty industry, the amount invested would also grow as investors have more deals to choose from.
As for marketing and advertising, the average market growth for this industry is one of the highest at 18.6%. COVID-19 also undoubtedly had an impact on the industry. At the beginning of COVID-19, many businesses panicked and paused advertising to cut costs given the uncertain economy. But as more people stayed at home and binged more TV, watched more movies, listened to more podcasts and consumed other media content, advertising became more important and many companies’ revenues grew later. So in the crowdfunding space, more companies might have entered the market, which led to an increase in dollars invested. And investors might have also realized the potential return of advertising startups.
At the same time, government services and retail shops and department stores saw the least amount of growth, with a decline of about 90% for both. However, it is important to keep in mind the decline was because there were not a lot of raises to begin with. Only three companies raised in 2020 combined. Government services, for example, declined from $25,000 to $2,000 because there was only one raise.
Lastly, investor check sizes and crowdfunding platforms also impact how much crowdfunding deals raise. If you want to know more about the average check size on the different crowdfunding platforms, stay tuned for next week’s chart!