Reg CF (Regulation Crowdfunding) has experienced a decline in the number of new deals offered in the third quarter of this year, according to a report from Crowdfund Capital Advisors (CCA). The report reveals a 9% decrease compared to the previous quarter in 2023 and a significant drop of 27% compared to the same quarter last year. This decline comes at a time when interest rates are increasing and the economy is slowing down, leading investors to seek lower-risk investments.
Despite the decrease in new deals, the total amount of money raised during Q3 reached $132.3 million, representing a 13.7% drop from Q2 2023. However, when compared to the same period in 2022, funding increased by 10.6%. This growth can be attributed to the higher interest rates experienced in 2022.
Interestingly, CCA’s report highlights that equity offerings reached $662,000, while debt deals decreased to $80,000. Furthermore, the number of securities offerings that raised more than $1 million declined to 22, lower than both the previous quarter and the same quarter in 2022.
The report also reveals that average valuations continue to rise, reaching a quarterly record of $15.3 million. Post-revenue firms had a median value of $18 million, while pre-revenue firms were valued at $15 million.
Despite a decline in job creation and support during the quarter, totaling 16.6k, the cumulative number of jobs created or supported in the industry has exceeded 325,000 since its inception.
In terms of platform performance, Wefunder continues to lead the Reg CF industry, raising $52 million in Q3 across 93 different securities offerings with over 19,000 investors. StartEngine followed closely with $31.8 million raised across 48 offerings, while DealMaker raised $16 million across 14 offerings.
A notable mention goes to Honeycomb, a funding portal focusing on debt offerings, which listed 60 new issuers during Q3. However, the debt offerings on Honeycomb tend to be for a lower amount of funds.
The debt market under the exemption saw 114 new offers, possibly reflecting the tight lending market. Average interest rates on debt offers stood at 11.72%, marking the fourth consecutive quarter of growth and an increase from the lowest quarterly rate of 6.8% in Q4 2021.
Revenue Share offerings also received attention in the report, with 41 issuers offering this type of security, targeting an average return of 1.6 times the original investment.
CCA described the Reg CF ecosystem as a “Beacon in the Storm” amidst a challenging environment for risk capital. Sherwood Neiss, a Principal at CCA, noted that investor sentiment is stronger than last year, with larger checks being written for more established (less risky) issuers. Neiss highlighted Reg CF as an “asset class to watch.”
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