Capture the value before an IPO with high yielding startup investments. Venture Economics have provided average returns data for Angel Seed investing. This category averaged 20-25% according to Venture Economics and the Angel Capital Association and Preqin put the overall VC category at about the same for their 2023 report.
If you are new to investing in companies offering equity at their seed stage a growing set of new investing portals have been created to help you access these returns. Note though that Angel investing is VERY risky. 1 or 2 of every 10 investments brings most of the returns while most of the other startups fail completely.
Non Accredited Equity Funding
If you are in the US you will fall into one of two categories, an accredited investor, or not. If you are wealthy enough in the SEC's eyes, or are able to pass new tests you can become accredited.
If you are accredited you have don't have to worry about restrictions of non accredited investing. Non-accredited status has greater restrictions around what you can access. The fact that you have access at all is somewhat of a recent change brought by Title III of the Jobs Act (aka Reg CF). Access to startup businesses offering shares at an early stage was limited to friends and family or accredited investors only. Now you can invest in these high growth startups, whether or not you have a personal relationship with the founder.
At Fund Wisdom the data and insights we focus on is this non-accredited regulated space. In order to understand the market size of this growing market let's put it into context with the broader categories of investing it fits within.
Alternatives - Private Equity (PE)
Most people are familiar with public equity and debt, stock and bond investing. Assets that don't fit these are often categorized as alternative investments. EquityMultiple put out a report in 2022 showcasing insights on the entire alternative market from 2020. They cite Chartered Alternative Investment Analyst (CAIA) & Preqin data suggesting Private Equity totaled $6.5 Trillion in assets.
The report brought light to the fact that the alternative markets are dominated by institutional investors and not individuals. I believe that will continue to shift as platforms like EquityMultiple, Wefunder, AngelList, etc. will balance this mix giving more individuals like me and you improved access.
Venture Capital (VC)
With Private Equity at $6.5 Trillion in 2020, of that how much was just Venture Investing? According to Pitchbook and the National Venture Capital Association (NVCA) deal value exceeded $300 Billion and fundraising topped $100 Billion, for 2021 year end. While Preqin reports in 2020 VC had $297 Bil invested and $121 Bil raised across 732 funds (pg 9). Preqin reported a total of Assets Under Management (AUM) at around $2.2 Trillion for 2021.
Angel & Seed
So out of the $300 Billion in venture capital how much was seed stage? The NVCA yearly report breaks down funding stages, stating seed makes up 6,181 deals at $18.4 Billion.
Regulated Equity Crowdfunding (Reg-CF)
2021 Global Alternative Finance Market Benchmarking Report by the University of Cambridge (UK) Judge Business School states the US saw $332 million in Equity Based Regulated Crowdfunding (Reg-CF) market in 2020. The Judge Business School's team categorizes "Alternative Assets" different from Preqin and Pitchbook.
Fund Wisdom Data
At Fund Wisdom we have followed and collected Regulated Equity Crowdfunding (Reg-CF) data from 2014. For this article we review data from the start of 2022. At this time we have data from Q1 and 2. I will update this article to include the Q3 data shortly. Q4 data is delayed by a few months so likely won't be able to complete the full year in review until March, 2023.
StartEngine appears to be leading the race in total number of offerings, at 348, with Wefunder not far behind.
Who is Achieving Success
We are looking into the Other classification of Asset type founders are using to raise money. Convertible notes I believe fall in this category for now.
Not surprising California has seen the most startups raising capital on platforms. Though Florida and Texas outpacing MA differs from traditional VC rankings by state.
Though California is the top state, I believe due to the spread of commercial real estate across all Silicon Valley San Fran comes in second. New York taking the top spot and my native Boston coming in at the 7th spot for most companies to start raising capital.
This is an ongoing series of articles. Previous reviews from years: 2019, 2020
In order to stay up to date with the latest data you can review the the live Dashboard that will be available for free for a limited period as we continue to build something you may find helpful. I welcome feedback and guidance as to what would be most valuable to you. If you are willing to take the time to write in I am happy to grandfather you into the GA launch, providing future access after the product is officially released.
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