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PitchBook Analyst Note: What’s Next for Equity Crowdfunding?

Q4 2020

PitchBook Analyst Note: What’s Next for Equity Crowdfunding?

November 16, 2020

PitchBook Analyst Note: What’s Next for Equity Crowdfunding?
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On November 2, the SEC reached agreement on updates to several crowdfunding regulations put in place through the JOBS Act. The updates aim to broaden the reach and increase the viability of crowdfunding campaigns by boosting limits placed on capital raise amounts, as well as creating a new structure for companies’ ability to touch base with prospective non-accredited investors before the offering goes live. Although equity crowdfunding isn’t in direct competition with VC, the reinvigorated laws may entice some companies to pursue capital financing through this alternative route rather than engage with VC firms early in their development.

Since being enacted in 2016, Regulation Crowdfunding has seen tepid adoption to date, but with 2020 already seeing the highest amount of capital raised through the financing exemption of any year to date, the updates and increased limits should provide a further boost to current momentum.