Crowdfunding Fizzles As VC Soars

By Gail Dutton, Contributing Writer
Follow Me On Twitter @GailLdutton

Equity crowdfunding was among the most ballyhooed new investment options during the first half of a cash-strapped decade. Now, with the stock market at an all-time high, money is flowing again, so the need for early-stage companies to attract large numbers of nonaccredited investors to make relatively small investments has waned.

FINANCING ENVIRONMENT TILTED
In 2013, startup companies were scrambling for funds. The previous year had seen the lowest number of firsttime VC financings since 1995. The average size of VC financings hovered around $5 million, and VCs were fleeing early-stage ventures in favor of less risky, later-stage companies. Entrepreneurs needed new sources for funding, and when the JOBS (Jumpstart Our Business Startups) Act was signed in 2012, crowdfunding seemed a good option.