Retail Investors Support Underrepresented Founders 10 Times More Than Venture Capitalists

Female and minority founders fared significantly better on a percentage basis raising capital through online startup investing (Regulation Crowdfunding) than they did raising money from venture capitalists (VCs), according to the KingsCrowd 2021 Market Intelligence Report. Startups with female founders received 19.3% of total online investments in 2021 – nearly 10 times more than they received from venture capital firms. Companies with minority founders made up more than a third of total online investments, receiving 31.5% of 2021 online funding. VCs allocated only 2.6% of their 2020 investments to minority founders.

Dollars invested through online startup investing grew by more than 130% from 2020 to 2021 and reached $486.8 million, according to the KingsCrowd 2021 Market Intelligence Report. KingsCrowd’s report also shows that online startup investing is enabling American startups outside of Silicon Valley and New York to find investors. Startups and small businesses based in the South received $130.1 million in investments in 2021.

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As the leading source for data and analytics on online startup investing, KingsCrowd collects hundreds of data points on every company raising capital online. Using this data, KingsCrowd estimates that total dollars invested in online funding rounds will grow at an average annual rate of 50%. By 2025, the market is likely to exceed $2 billion in annual investments. This growth will be fueled by investors looking for portfolio diversification, the development of secondary markets for startup shares, and increased interest from institutional investors.

Online startup investing enables startups and small businesses anywhere in the US to raise capital online through equity or debt financing. Investors of all backgrounds and incomes can choose to invest in these companies, often through online platforms such as Wefunder, Republic, MainVest, or others. This process represents the democratization of venture capital, and it began in 2016 when regulations, mandated by the 2012 JOBS Act, went into effect. In just five years, online startup investing has grown to reach nearly half a billion dollars in annual investments and more than 1,400 unique funding rounds.

Despite early doubts about the efficacy of online startup investing, the system has proven to be very successful. In 2021, KingsCrowd found that nearly 90% of all equity-based funding rounds and more than two-thirds of all debt-based rounds were successfully funded.

The KingsCrowd 2021 Market Intelligence Report provides an in-depth review of online startup investing in 2021. It identifies the top performing equity crowdfunding platforms, the most funded industries, the breakdown between equity-based deals and debt-based deals, rates of deal success, and growth forecasts for the online startup investing market.

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