Crowdfunding is on the Rise: Here’s What That Means for Entrepreneurs

It’s fair to say that starting a business is bittersweet, especially in 2021. On one hand, it’s exciting to realize your entrepreneurial dream, but on the other hand, common challenges like raising business capital can discourage entrepreneurs from progressing a business venture. However, even during the pandemic, new business applications were at an all-time high. By the end of 2020, there were nearly 4.5 million applications, which was a 24% increase from 2019. This is certainly encouraging for entrepreneurs interested in starting a business in 2021, but for those who are still unsure about available capital, a new crowdfunding statistics report from EquityNet reveals valuations and funding goals are on the rise. 

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Read on to learn more about how business crowdfunding goals increased from 2007 to 2020 and how you can utilize these statistics to raise the desired capital for your business:

Average funding goal varied by industry

According to EquityNet’s proprietary data, in 2020, the average crowdfunding goal was more than $2.2 million, and the average funding goal increase from 2007 to 2020 was 36%. This double-digit percentage growth is a trend from which a wide range of industries have benefited. 

The Energy & Utilities industry had the highest average funding goal at just over $3.8 million, and the Consumer Products & Services industry had the lowest at $1.28 million. 

The data also revealed these two industries were at the top and bottom of the pre-money valuations table. Crowdfunding campaigns in the Energy & Utilities sector have the highest pre-money valuations — greater than $10.7 million on average — while the Consumer Products & Services campaigns have the lowest: $3.8 million. 

Regardless of the size of the funding goal, it’s great to see both metrics exceeded expectations and benchmarks. In fact, the average business valuations exceeded the 22% funding goal benchmark with an increase of 31% across the board between 2007 and 2020.

Related: 10 Tips on Running a Successful Crowdfunding Campaign for New Entrepreneurs

Crowdfunding raises reached all U.S. regions 

The data also examined the five U.S. regions, and when it comes to funding goals, the average goal in the West was $2.24 million compared to the Southwest region, where the average goal was $1.8 million. 

When you look even further at the age of companies, the Midwest has the oldest companies with an average age of 6.86 compared to the Southeast, where the average company is fewer than six years. Traditionally, most lenders prefer to lend to those that have been in business for at least a year or two. This could explain why the data found the Midwest and Southwest received the most equity, with the Midwest and Southwest both receiving almost 31% equity. 

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Key takeaways on crowdfunding

Overall, this report not only proves that crowdfunding raises are on the rise but that the ecosystem and business funding environment has a positive future for current and future entrepreneurs. Whatever your business idea, wherever the location of your business or the age of your company, take advantage of valuable resources and opportunities that come your way.

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