Title III of the JOBS Act went live in the US on the 16th of May 2016 and has led to comparisons between the different ways the US and the UK are supporting equity crowdfunding (including a great piece from Jeff Lynn in Techcrunch).
Running with this theme, we decided to explore the extent to which the differences in regulatory approach in each country has impacted the launch of platforms in each market and the relative maturity of the industry (the US has adopted a stricter approach compared to the UK). This covers the number of platforms each market has, launch activity by year and the platform success rate.
Number of equity crowdfunding platforms
We have seen 176 equity crowdfunding platforms established in the US, significantly dwarfing the 41 in the UK. Given that the US economy is much larger than the UK, this difference isn't surprising. It is probably more appropriate to compare the US with Europe (which has 159 equity crowdfunding platforms excluding the UK and 200 including), as the economies are closer in size.
Platform launch by year
In terms of active launch years, the UK (which has had more flexible regulations for equity crowdfunding) saw nearly 60% of the market (by number of platforms) established between 2011 and 2013. In the US, the peak platform launch years were more recent, with over 60% of platforms created between 2013 and 2015 (coinciding with its regulatory changes). This is consistent with a widely held view that the UK equity market is more mature compared with the US.
Platform success rate
In terms of platform success, 87% of the platforms launched in the US are still operating today. This contrasts with 71% in the UK. The higher success rate in the US could be attributed to platforms still working through initial funding and benefitting from a substantial decrease in technology and operating costs over the last 12-24 months. In the maturer UK market, platforms have also had more time for their success or failure to become apparent.
Overall, it appears that tighter regulations have held back the growth of the US equity crowdfunding market to date, in contrast to the UK. However, this delay has allowed platforms in the US to watch their counterparts across the Atlantic and benefit from the experiences and technologies they have developed. The rapid increase in activity in the US has coincided with the passing of the JOBS Act and it will be interesting to see how the market evolves from here.
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