Crowdfunding. Market Report. Facts and Figures Collected Between Q3 2012 - Q3 2013 by Crowd Valley Inc. October 2013. Pa
Crowdfunding Market Report Facts and Figures Collected Between Q3 2012 - Q3 2013 by Crowd Valley Inc October 2013
Part of the
IMPORTANT NOTICE Please note that the provision of the information in this presentation does not create and is not intended to create a relationship between Crowd Valley Inc. and any other person. You are not and should not regard yourself as being a client or customer of Crowd Valley Inc. and must not expect Crowd Valley Inc. to have any duties or responsibilities to you, act for you or your clients, or be responsible for providing protections afforded to customers or yourselves or be responsible for advising you in any respect. Please consult your own advisers as you deem necessary.
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EXECUTIVE SUMMARY Following a year of independent operations Crowd Valley has gained a central position in the fastgrowing global crowdfunding market. This has given the company a broad overview on the sector’s most recent developments, with data collected on over 6,000 companies and individuals to date. The present report, based on surveying a sample of more than 500 of these individuals and companies that expressed an interest in entering the crowdfunding market, has translated that broad overview into facts and figures. The demand for crowdfunding technologies is still mainly based in the USA and it is above all directed at equity investment models for startup companies. Nevertheless, other investment models, for example lending, and alternative asset classes, for example real estate, are on the rise. Regions in Europe and Asia are also starting to play a major role in the crowdfunding sector, displaying fairly high percentages of the total demand for crowdfunding services. The variety of organizations and professionals interested in entering this new financial market is significant, with new companies, broker-dealers and already established companies representing the major categories. Many organizations and professionals are looking to become authorized by a financial regulator for the first time, either by applying for authorization themselves or by working with authorized partners.
INTRODUCTION On the 3rd of September, Crowd Valley Inc, the US-based crowdfunding platform, ecosystem services and back office provider, celebrated its first year of operations. In twelve months of global activity in the fast-growing sector of crowdfunding the organization had collected plenty of data. These can offer an interesting outlook on the current status of the market. On the 23rd of September, Title II of the JOBS Act became effective, allowing companies publicly to solicit investors and advertize the sale of securities 1. It will not be long before this rule begins to produce its effects on the crowdfunding market. Therefore, Crowd Valley believes it is the right moment to frame the sector’s current situation and use it to evaluate, in a year’s time, the impact of the American regulation on the global crowdfunding market. The company analyzed a sample of more than 500 observations from five continents to unveil what are the most interesting trends in the sector of crowdfunding, which are presented in the next sections.
DISCLAIMER ON DATA COLLECTION It should be taken into account that the sample used to analyse the market’s trends is composed only of organizations and professionals who approached Crowd Valley due to interest in one of the company’s services.
1
McNamee, D. SEC Changes Rules Governing the marketing of Sales of Securities. 2013.
http://www.crowdvalley.com/2013/07/24/sec-changes-rules-governing-the-marketing-of-sales-of-securities/
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INVESTMENT MODEL Being a provider of technologies, services and methodologies for securities professional looking to get involved in this new financial market, Crowd Valley seeks to understand what is the demand for the different investment models. The company identified four main categories of investment models: 1) Equity-based crowdfunding; 2) Lending, which includes peer-to-peer lending, business loans and other forms of lending; 3) Reward-based crowdfunding; 4) Combined, which refers to those cases where two or more of the aforementioned models are combined in one platform. The chart below shows the percentages each investment model holds on the total demand for crowdfunding platforms.
Investment Model 5%
3%
14%
78% Equity Lending Reward Figure 1: Investment Model
Combined
ASSET TYPE Even if many people still associate crowdfunding with startup companies, during the past two years, this new financial service has been used to invest also in other assets than startups. Crowd Valley has directly witnessed a rising demand for crowdfunding portals for assets, like real estate, cleantech, energy and many others. In particular the company identified four main categories of assets: 1) Startups; 2) Real Estate; 3) Other Real Assets, which include, among others, energy, cleantech and life science; 4) Other, which includes all other kinds of assets, that could not fit into the former categories, for example education, intellectual property and research. The chart below represents the total demand for Crowd Valley’s crowdfunding portals divided by asset types.
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Asset Type 15%
23%
46%
Startups 16%
Others Other real assets Real Estate
Figure 2: Asset Type
CLIENT PROFILE In the past year, many organizations and professionals have approached Crowd Valley with an interest in the company’s crowdfunding technologies or other related offerings for the crowdfunding market. The variety within this audience is particularly interesting. The company identified several types of organizations which were then grouped in the following categories: 1) Broker-Dealer representatives; 2) Angel Network; 3) New Company, which refers to potential clients who are planning to create a new company for specific crowdfunding activity; 4) Incubator; 5) University; 6) already existing Crowdfunding Platform; 7) Other, which includes already established companies that are planning to expand their operations into crowdfunding.
Organization Type
21%
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Figure 3: Organization Type
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From the sample used to conduct the present analysis, Crowd Valley could also extract data regarding another interesting aspect of potential clients’ profiles. Namely, the company could observe how many potential customers have already an authorization by FINRA or other financial regulators and how many are pursuing regulatory approval for the first time. The current situation, as framed by the chart below, with the absolute majority of potential clients pursuing regulatory approval for the first time, leaves space to those companies and individuals having already the requisite authorization and licenses to play a crucial role in supporting the growth of this new financial market.
Client Profile 26%
74%
Authorized Not Authorized
Figure 4: Client Profile
THE GEOGRAPHY OF CROWDFUNDING OPERATIONS The demand for crowdfunding services is global. In fact, as shown by the following chart, the organizations and the professionals who approached Crowd Valley during its first year of operations are from six different regions. From Europe comes a significant demand (26%), mainly driven up by the UK (13%) and Italy (5%). Interestingly enough, Asia and Africa, which are usually said to be marginal in the crowdfunding sector, show instead a fair demand, that is 12% and 8% respectively. It should be noted, as depicted in Figure 6: Top Locations, that the divergence in locations is vast.
Crowdfunding in Regions
2% 12% North America
8%
South America 47%
Europe Africa
26%
Asia Oceania 5%
Figure 5: Crowdfunding in Regions 6
Top Locations United States
36%
United Kingdom
13% 5%
Italy
4%
Canada India
3%
France
3%
Spain
3% 33%
Other
40%
35%
30%
25%
20%
15%
10%
5%
0%
Figure 6: Top Locations
FOCUS ON THE USA Even if the demand for Crowd Valley’s crowdfunding services and technologies is global, the biggest market remains in the USA (36%), where the crowdfunding sector is more established than elsewhere 2. Thus, this section presents facts and figures focused on the US market.
Investment Model ( USA ) 5%
2%
10%
83% Equity Lending Reward Figure 7: Investment Model (USA)
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Massolutions, 2012. Crowdfunding Industry Report.
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Combined
Asset Type ( USA ) 7%
31%
47%
Startups 15%
Others Other real assets Real Estate
Figure 8: Asset Type (USA)
Organization Type ( USA )
30%
8%
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5%
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8%
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27%
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5%
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18%
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Client Profile ( USA )
31%
69% Authorized by FINRA Figure 10: Client Profile (USA)
Not Authorized by FINRA
CONCLUSION In a year of activity, Crowd Valley has gained a central position in the international fast-growing market of crowdfunding, which presents the company with a privileged outlook on the sector’s most recent developments. The present report, based on more than 500 observations collected by Crowd Valley, has translated that broad overview into facts and figures, which may be summarized as follows: The most significant interest relates to the equity crowdfunding model; There has been noticeable growth in the interest in alternative asset classes beyond startups; The majority of market entrants are not yet authorized with financial regulators and therefore will be working with financial regulators for the first time; As expected, the most interest has emerged from North America and Europe, showing an apparent correlation between interest in the sector and forthcoming regulatory activity (notice US, UK, Italy, Canada all have newly written regulation or will shortly release regulations in crowdfunding or P2P lending); Within the US, already active asset managers and broker dealers are showing significant interest in the new regulations applications, possibly because they see an opportunity in syndication and new distribution channels 3. By publishing this report Crowd Valley aims to expand current knowledge on this new, transparent financial sector and support regulators and other relevant stakeholders in the global ecosystem in evaluating the market’s evolution. This report is to be followed by recurring publications of market insights.
3
Lampinen, M. Crowd Valley celebrates Firts Year of Operations, Predictions for 2014. 2013.
http://www.crowdvalley.com/2013/09/03/crowd-valley-celebrates-first-year-of-operations-predictions-for-2014/
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CONTACTS
Markus Lampinen Crowd Valley CEO
[email protected] (646) 801 4054
Paul Higgins Crowdfunding and Peer-to-Peer Expert
[email protected] (347) 871 0033
Rex Kempcke Energy Expert
[email protected]
AUTHORS
Alessandro Ravanetti Chief Marketing Officer
[email protected]
Irene Tordera Marketing and Communication Coordinator
[email protected]
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