The Rise of Equity Crowdfunding Amidst VC Decline

Discover how startups like 'The Sill' are navigating the funding landscape by turning to equity crowdfunding as traditional VC routes become challenging.

Author

Jeff "fuzzy" Wenzel
October 16, 2023

VC Funding Has Taken a Nosedive, Crowdfunding Rounds Not So Much

VC Funding Has Taken a Nosedive, Crowdfunding Rounds Not So Much

In recent times, venture capital (VC) funding has declined, but equity crowdfunding has remained resilient. Eliza Blank, who started a direct-to-consumer plant business called "The Sill," bypassed pre-seed venture capital and initiated a Kickstarter campaign. Despite its initial success and a subsequent $6.5 million Series A funding, the company faced challenges in raising venture capital in later years. As a result, The Sill turned to equity crowdfunding on Wefunder. Equity crowdfunding has gained traction, with 449 deals in the first half of 2023, a 10% increase from the same period in 2021. The SEC's decision to raise the annual cap for crowdfunding from $1 million to $5 million in 2020 further boosted the industry. Platforms like KingsCrowd have also emerged, offering crowdfunding data tracking and investment opportunities. The approach has widened opportunities for amateur investors and brought transparency to private markets.

3 Take Aways

  1. Shift in Funding Landscape: The resilience of equity crowdfunding amidst a decline in VC funding indicates a potential shift in the startup funding landscape. Founders are exploring alternative routes to raise capital.

  2. Transparency in Private Markets: Equity crowdfunding platforms often require startups to disclose more detailed financial data. This transparency can benefit investors and the broader market by providing clearer insights into a company's financial health.

  3. Success Stories Drive Adoption: Success stories, like that of fintech company Alto, which raised significant funding through crowdfunding and later secured a substantial valuation, can inspire other founders to consider this route.

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