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Researching equity crowdfunding valuations

May 25, 2016 • By TAB team



For fundraisers, their decision to use equity crowdfunding is often dependent upon the valuations they can achieve and the likelihood of raise success. For investors, valuations are instrumental in determining whether the fundraise is an attractive investment opportunity. We therefore have many users coming to us to research the valuations that similar businesses have achieved.
It is great to see so many businesses turning to equity crowdfunding to raise investment and to see so many investors supporting these fundraises. JustPark, Gojimo and Curious Brew are examples of businesses that have successfully raised millions of dollars from hundreds of individual investments.

For fundraisers, their decision to use equity crowdfunding is often dependent upon the valuations they can achieve and the likelihood of raise success. For investors, valuations are instrumental in determining whether the fundraise is an attractive investment opportunity.

We therefore have many users coming to us to research the valuations that similar businesses (to a given company) have achieved. Typical questions include:

  • What are the typical pre-money valuations of crowdfunded businesses like [insert company description]?

  • Are the valuations that businesses are seeking increasing?

  • Does valuation impact success rate?

One such request centred on mobile applications. These were the answers:


What is the typical valuation for mobile application businesses?

On an analysis of 91 mobile application raises, the average valuation increased from $1.3M in 2013, to $2.4M in 2014 and then to $3.3M in 2015. The median showed an increase from 2013 to 2014 and then a drop in 2015 ($1.5M, $2.2M and $1.8M respectively). The 2016 median (to April) saw a dip in average valuation compared with 2015.

Are the valuations that businesses are seeking increasing?

It appears so. The highest valuation in each year has increased from $2.2M in 2013 to $10.6M in 2014 and $24.2M in 2015. This and the increase in average valuation highlighted above, indicates that businesses targeting higher valuations are beginning to opt for equity crowdfunding.


Does valuation impact success rate?

In this case, it doesn't appear to have a significant impact. When breaking down the companies by pre-money valuation size (as seen on the graph below), the companies with valuations below $1M and valuations above $2M have higher success rates (84% and 85%, respectively) than the companies with valuations between $1M and $2M (78%). However, these differences aren't material enough to say certain ranges are clearly more successful than others.

The overall campaign success rate of the raises sampled is 82%, with successful campaigns having a higher average pre-money valuation of $3M compared to $1.9M for non-successful campaigns.





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