To do this, we're taking a look at a couple of charts from the Crowdsurfer Pro dashboard which explore successful UK equity crowd finance raises in 2016.
Our first chart shows the spread of raises by volume of successful UK equity campaigns in 2016.
It's clear that equity crowd finance continues to be dominated by small volume transactions, with the average total amount pledged per campaign standing at $732,000. The distribution is heavily skewed towards deals under $1 million, as a result of the fact that the sector is dominated by startups and SMEs looking to raise seed and early stage financing, rather than later stage businesses.
There is data evidence that later-stage companies - those that have achieved product-market fit or who require capital to scale their operations - are increasingly interested in crowd finance. We expect this to pick up further in 2017 and beyond, as crowd finance begins to benefit from increased awareness and trust amongst entrepreneurs and investors alike. Developments in the regulatory environment will play a key role here too.
Delving into the second table, we can discern much about the nature of UK equity crowd finance transactions.
Campaigns in 2016 were characterised by their granularity, with an average of 316 backers taking part in each campaign. That's quite a lot of shareholders on a share capital table! Also, it’s interesting to note the trend towards over-funding, with the average raised per campaign standing at 130%.
In this way, successful crowd finance campaigns mirror those in the global capital markets; like traditional bond and equity transactions - where pledges are collected by salespeople via an electronic order book system - crowd finance is all about momentum. Campaigns that have reached or are near their funding targets benefit from increased media exposure and investor confidence. This opens up new pockets and sources of liquidity and results in, more often than not, campaign targets being exceeded.
These charts underscore the need for entrepreneurs to think carefully about funding targets before launching campaigns, there are tactics at play with selecting an amount to raise. Equally important is the need to communicate effectively with investors and the market at large in order to achieve successful outcomes.
The data further points to opportunities for mature companies to raise large volumes of capital via crowd finance, leveraging brand value and positive investor sentiment.
The bottom line? Access to accurate market data is crucial for entrepreneurs and investors alike. Getting a handle on the numbers helps stakeholders throughout the crowd economy make better decisions and avoid costly mistakes, particularly in light of mounting concerns regarding inflated SME valuations.
Take advantage of Crowdsurfer to research your own fundraise or to answer any other questions you have about crowd finance. Register here to access the most current and interactive data intelligence on the industry.
What is Crowdsurfer Pro?
Crowdsurfer Pro is the world's most trusted, data intelligence service for the global crowd finance phenomenon. Using big data engineering and machine learning, Crowdsurfer Pro distills billions of data points on individual raises into usable intelligence for fundraisers, investors and regulators.