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58% Highly Interested in Early Stage Equity Investments

A new study conducted by EarlyIQ, the Crowdfund Professional Association (SeedInvest sits on the Executive Committee) and Crowdfund Capital Advisors has just been released, bringing with it some very encouraging statistics. The first national study of its kind, the study was an online survey of 480 respondents nationwide (with a minimum of $25K annual income), and found that 58% of all respondents indicated a high interest in early stage equity investment.

This figure was obtained by the fact that when asked to indicate their level of interest in equity crowdfunding on a scale of 1 to 10, 58% were in the range of 7 to 10. 22% fell into the 1 to 4 category, which meant little or no intent, 20% chose 5-6, which meant they were unsure. The survey also found that investors were likely to make two to three investments annually, giving on average slightly under $2,000 towards each investment. SeedInvest advisor Jason Best remarked, “The passage of the JOBS Act was a key milestone for democratizing capital in the US. This research demonstrates the broad appeal in middle-America and we believe demonstrates a mandate rollout of equity crowdfunding in the US.”

While we are excited about the public’s enthusiasm towards crowdfunding, perhaps the most important fact to consider from this study is that investment intent quadruples overall when a neutral third party provides review of the management team. When respondents who were likely to invest and had an annual income of over $75,000 were presented with a company of which they had no prior knowledge, 68% said they would invest only with third party information, with a further 16% saying they would invest even if there was third party information of a similar company but none of the target company itself. 

When compared to the 22% who would invest with no prior or given information, this is a concrete affirmation of the importance of crowdfunding portals for both ends of the deal. With transparency of the management team found to be the greatest concern of likely investors in this survey, crowdfunding portals play an important role in mediating the exchange to ensure investors have access to comprehensive information. The sentiments of those surveyed are best summed up by comments such as “I’d want to see the business plan. I’d want to learn as much as possible about the principals” or “I would like to see a business plan and know exactly they are going to use the money for (equipment salary etc.)”. The study cites the fact that about 25 to 30% of investment comes from those who are first degree associations of the company, which means that 70 to 75% would have to come from those investors they didn’t already know.

Providing great insight about investor intention and priorities, the survey also sheds light on the direction in which the industry of crowdfunding is taking. With the advent of crowdfunding facilitators in the past year, we’re hoping that business will flourish as those services will meet a very real demand.

– Andrea


This post was written by SeedInvest on March 18, 2013

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