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Crowdfunding: New Rules, New Report

Release Date: 
Wednesday, May 11, 2016 - 8:15am
Release Number: 
16-06
Contact: 
Elle Patout

For Release: May 11, 2016

SBA Number: 16-06 ADV

 

Contact: Elle Patout

Elle.Patout@sba.gov

 

Crowdfunding: New Rules, New Report
Advocacy report shows successful crowdfunding campaigns lead to more capital from outside investors.
 

          WASHINGTON, D.C. – Final equity crowdfunding regulations will become effective in less than a week, and many entrepreneurs are ready to take advantage of a previously unavailable resource to raise capital.  Today, the Office of Advocacy, an independent office within the U.S. Small Business Administration, released a study entitled Research on the Current State of Crowdfunding: The Effect of Crowdfunding Performance and Outside Capital by Venkat Kuppuswammy and Kathy Roth.  The report examines crowdfunding campaigns and the potential to receive further outside investment after a crowdfunding campaign. 

 

“Access to capital is one of the struggles we consistently hear about from small businesses and entrepreneurs,” said Chief Counsel for Advocacy Darryl L. DePriest.  “Today’s report shows that crowdfunding can lead to greater business development, and I hope these new rules will enable capital to get in to the hands of America’s small business owners to help grow our economy.”

 

“To start a business you need capital, and to grow your business you need continued investment,” said Chief Economist and Director of Economic Research Christine Kymn. “This publication illustrates how America’s entrepreneurs can utilize successful crowdfunding campaigns to prove their worthiness to future investors and thus open the door to future capital injections.”

 

Highlights from today’s report include:

  • Successful crowdfunding campaigns positively influence entrepreneurs’ ability to attract additional capital, likely by providing proof of concept to potential external investors.

 

  • There is no evidence that the gender of the entrepreneur has influence on the investments after a successful crowdfunding campaign.

 

  • Successful smaller crowdfunding campaigns or those raising less than $75 thousand could illustrate to investors a viable business model.  These smaller campaigns, which could likely signal proof of concept, can increase chances of obtaining further external capital.

 

  • Entrepreneurs that raise over $125 thousand from successful crowdfunding campaigns have more than a 50% probability of obtaining external capital. 

 

The report can be found here on the Office of Advocacy website.  For a summary of the findings, please click here.

 

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The Office of Advocacy of the U.S. Small Business Administration (SBA) is an independent voice for small business within the federal government. The presidentially appointed and Senate confirmed Chief Counsel for Advocacy advances the views, concerns and interests of small business before Congress, the White House, federal agencies, federal courts and policymakers. Regional advocates and an office in Washington, D.C., support the Chief Counsel’s efforts. For more information, visit www.sba.gov/advocacy, call (202) 205-6533 or get updates on Twitter (@AdvocacySBA) or Facebook at www.facebook.com/AdvocacySBA.