Equity crowdfunding outperforms traditional markets in 2022 with $30 billion a year growth forecast by 2028
If 2022 is remembered as the year equity crowdfunding cemented its position against more traditional investments, 2023 will surely go on record as an important year for this form of alternative investment to further democratize private securities.
According to new research by Statista, global spending on equity crowdfunding will top $17.8 billion by the end of 2023 — up more than 15% on 2022 ($15.13 billion) and a staggering 189% since 2020 — the US market percentage growth is even faster at 17% in 2022 against a backdrop of major geopolitical challenges.
A key factor has been a growing level of retail and accredited investor confidence following more improved legislation, courtesy of the JOBS Act. Equity crowdfunding now has a proven track record and improved regulatory oversight and is becoming more attractive as a result, especially following the problems of cryptocurrency exchanges.
Writing in Forbes recently, Jeff Bartel, Chairman and Managing Director of Miami-based private investment and strategic advisory firm Hamptons Group, said: “Equity crowdfunding has become so popular that one estimate suggests more than 50% of campaigns successfully meet their initial goals, and 78% [of those] can generate enough funds to exceed their goals.
“This is a trend that is expected to continue for some time. Experts predict the equity crowdfunding market will reach nearly $43 billion by 2028.”
Meanwhile, traditional investments in public markets have declined, with the S&P 500 down 20% in the year to date, and alternative investments in crypto currency exchanges suffering major setbacks and falling values recently.
By contrast, equity crowdfunding continued to gain popularity among investors and start-ups keen to find a different route to accessing finance previously dominated by the big venture capitalists and public market IPOs.
For private company entrepreneurs, it allows them to continue to steer the ship while also accessing the capital to invest and accelerate growth through building their own community of advocates and investors.
According to research published in December, by Grand View Research, “growing demand for integrating innovative technologies such as blockchain, machine learning, and Artificial Intelligence (AI) into various digital platforms is expected to propel the growth of the segment”.
And its rise is mirrored in the decline of traditional IPOs. Data from StockAnalysis.com revealed, as of September 12, there had been just 153 IPOs on the US stock market in 2022– a 78.9% drop against the same point in 2021.
While a report published by EY in December revealed the number of US IPOs during quarter three of 2022 fell by 74% on the previous year, with proceeds consequently down by 94% through the first nine months compared to 2021. It added that US public stock markets are set to record their lowest proceeds since 2003.
Paul Stannard, chairman of Breakthrough Ventures and the World Digital Foundation, said: “Since 2016, when the JOBS Act legislation opened the door, equity crowdfunding has exploded in popularity and secondary trading of these assets will inevitably create the potential for greater liquidity in the long term for private securities.
“It offers retail investors new opportunities to invest but, importantly, there is also regulatory oversight in place.
“But the biggest difference is for the start-ups. It provides access to funding avenues that simply weren’t as popular before.
“It is still a high-risk business and there is no golden ticket. But so long as those behind the ventures have a strong marketing and communications plan, plus an understanding of the money needed to kick-start and maintain an equity crowdfunding campaign, they can benefit.
Read the full article: https://www.einnews.com/pr_news/611122507/equity-crowdfunding-outperforms-traditional-markets-in-2022-with-30-billion-a-year-growth-forecast-by-2028