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Equity Crowdfunding vs Venture Capital

August 19, 2016

This week we take a look into the similarities and differences between venture capital and equity crowdfunding in relation to startup investments on a state-by-state basis. Venture funding has been more difficult for startups to get a hold of, and that was one of the many reasons regulation CF started. It was supposed to provide a better opportunity for startups outside of the traditional tech hubs to raise capital. So with 3 months of data to comb through, we wanted to see if it was actually making a difference. 

Venture  

The U.S. accounts for nearly 70% of total global venture capital, followed by Asia and Europe who both hover around 14%. But if you're looking to build a startup outside of three specific states, your chances of raising funds through venture capital are slim. Over the course of 6 years, New York, California, and Massachussetts have accounted for nearly 66% of venture capital deal share in the entire United States. Meaning those particular states are responsible for two out of every three deals getting funded through venture capital. In the charts below, you'll be able to see the difference between both

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Equity Crowdfunding

According to this new Forbes article, equity crowdfunding could hit $36 billion by 2020 if it doubles every year, like the rest of crowdfunding has. The launch of regulation CF meant equity crowdfunding would be a new form of funding that could help startups raise capital outside of the traditional markets. Not only was this supposed to help startups have less of a hassle raising capital, but we would hopefully see equality in the demographics of the deals coming in. But is that really the case?68bbdb3b-d19a-4dc9-82d5-ed0599f72a1f_1.png

 

Wrap Up

Luckily, the data shows that equity crowdfunding seems to allow startups across the United States to get a better opportunity at funding. However, we are still seeing a pattern in which California still receives a large portion of the pie. Next week, we'll provide a more comprehensive look at the equity funding landscape, and show you which states are looking to break the mold when it comes to funding and deal flow. We will also provide some key takeaways on what it takes to hit your minimum investment, and which particular industries are performing the best under Reg CF. 

In order to get an exclusive look at that report, be sure to subscribe in the box above or create an account using the button below. You can also check out our previous report here

 

 

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