Happy New Year
Happy New Year from the S. Jordan Associates team. We are very thankful for being a part of the healthcare industry and for the outstanding year the sector experienced in 2013 including robust capital markets activity (~IPOs), surging stock prices, creative and innovative partnering deals, and number of drugs/medical devices approved. We wish you and your family many blessings in the year to come. Many consider 2013, “The Year of the Crowd,” and the S. Jordan Associates team had the honor of assisting Healthios with the launch of their Crowdfunding portal, HealthiosXchange. The mission of HealthiosXchange is "To Unify the Promise of Medicine with the Fortunes of Those Who Invest in It."
A Year in Review - Crowdfunding
The passage of the JOBS Act was a transformative moment in the history of the capital markets fueling “Direct” investing. Legislation oftentimes moves markets and this time was no different. Just as regulations historically sheltered financial markets from technology disruptions observed in many other industries (~think iTunes and the music industry), the JOBS Act has fostered an environment where investors can now gain access to premium venture-stage deal flow previous unattainable while issuers benefit from increased access to Accredited/Non-Accredited investors on an unprecedented scale.
Jumpstart Our Business Startups Act, Access to Capital is Becoming Commoditized
In the past, issuers were forced to use “Finders” because they could not advertise to investors under Reg D. With passage of Title II of the JOBS Act (General Solicitation), investors can solicit Accredited investors without a previous relationship for the first time since the Great Depression. General solicitation, in effect, makes discovering capital more efficient and accessible to all and has the potential of eliminating the fee structures historically standing between companies and investors. Now issuers have the ability to socially power the funding of a project via a small number of monetary investments. Cutting out the intermediaries or “Direct” investing is now the new normal for issuers and investors seeking to transact in the private equity marketplace.
Crowdfunding is a Global Phenomenon
Consider the following:
- Research from Massolution estimates the value of Crowdfunding has already doubled since 2012, totally nearly $5.1 billion
- Between 2009 and 2012, Crowdfunding expanded at a compound annual growth rate of 63%; by 2015 $93 billion in investment funds could be globally available
- Crowdfunding grows globally each and every day; by 2025, developing country households could collectively represent $96 billion a year in investments
Equity Crowdfunding’s Strong Year in 2013
Though comprising a small percentage of the overall Reg D marketplace ($1 trillion marketplace), Crowdfunding is growing rapidly. Market leaders in “niche” (CircleUp) and industry agnostic (RockthePost) Crowdfunding had outstanding years as evidenced by the amount of capital raised from Accredited investors:
- Circleup: $20.7MM
- RockthePost: $17.2MM
- MicroVentures: $16MM
- AngelList: $13.9MM
- FundersClub: $8.8MM
- RealtyMogul: $8MM
“Blue Chip” Institutional Investors Validating the Sector
220 venture capital firms and angel/groups have invested in Crowdfunding platforms pouring $866 million into 45 platforms. The vast amount of capital went into debt-based platforms (79%); donation, equity and reward made up the rest of the funding in that order. Investments in Equity Crowdfunding was limited by uncertainty surrounding Crowdfunding regulations. Of interest, Union Square Ventures, a leading venture capitalist, has five investments in the space including:
- Circleup (Equity Crowdfunding)
- FundingCircle (Debt Crowdfunding for small businesses)
- Kickstarter (Reward Crowdfunding)
- Lending Club (U.S. Peer-to-Peer)
- Auxmoney (German Peer-to-Peer)
Read my Predictions for Crowdfunding in 2014
Upcoming speaking engagements:
Jan 14: OneMedForum SF 2014, San Francisco, CA (During JPMorgan Healthcare Conference)
With the passage of Title II of the JOBS Act, a handful of Healthcare dedicated portals have already begun raising capital for emerging growth companies to accredited investors. This session will include the primary players who will discuss the early results and comment on the effectiveness of this strategy for healthcare companies. " target="_blank">Learn more>
Jan 22: Crowdfunding Healthcare: Secrets from Industry Insiders, Boston, MA (co-hosted with HBS Healthcare Alumni Association)
Almost two years has passed since the congress approved JOBS act, which would allow small businesses to raise capital from ordinary people. The long-anticipated September 23, 2013 repeal of the ban on public advertising of private securities offerings will help to usher in a new era of transparent, information-rich, and crowd-vetted capital markets. Now thousands of healthcare and life science emerging companies can take advantage of new mechanism to raise funds from accredited investors. " target="_blank">Learn more>" target="_blank">