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Visit any equity crowdfunding site and you will see a stream of what may seem like long shots. But on January 30th, 2025, Beta Bionics, a biotech company that, among other therapies, developed an artificial pancreas for better diabetes management, proved to be winner when they went public ,($BBNX), raising $234.6 million in an IPO that values the company at just over $1 billion as of February 5th.Â
8 years ago, in July 2016, if you had scrolled through Wefunder, you might have seen Beta Bionics’ crowdfunding campaign. If you saw the potential of what they were building (or had a crystal ball) you might have been one of the 718 retail investors who participated in their $1m reg CF round. At the time, they were the first startup to raise $1m through equity crowdfunding on Wefunder.
The successful exit of Beta Bionics, which started its venture journey from such unconventional beginnings, should be a turning point for how investors, retail and accredited, view the viability and validity of equity crowdfunding platforms and the companies who raise from them. Long relegated to the fringe of the venture ecosystem, Equity crowdfunding deserves an invitation, if not a seat, at the (cap) table.
The Price of Access
There are very few quick wins, and no guarantees, in the VC game. The average fund takes about 10 years from the first capital investment to return the profits (if any) to their investors. Just like startups, over 50% of VC funds fail – unable to even return the initial investment to their LPs.
This risk is why the SEC set forth the salary and net worth requirements for accredited investors. While intended to protect retail investors from shady practices and scam promises, it not only excluded the vast majority of tax paying Americans from one of the most lucrative wealth creation streams of the tech economy, it also excluded thousands of small businesses that were otherwise not attractive to conventional VCs from raising significant growth capital.
The legalization of Reg CF on May 16, 2016, barely 2 months before Beta Bionics launched their campaign, allowed layman investors to write checks as low as $100, while ensuring that the companies raising on these platforms had a legal and regulated way to roll up what could be hundreds of small investors into a tidy SPV, barely a line on the cap table.
Reg CF sent a strong message: We trust you to make your own investment decisions, but in exchange you will assume the risk. It’s a big risk, too. The earlier you invest in a company, (usually called the “seed” round) the more risk you take on that it will fail. The tradeoff is you stand to make the biggest return if the company succeeds. To illustrate, seed stage investors generally seek a 100x return while Series B investors (when the company is more mature and likely already has revenue + growth potential) seek 3x-5x. (source: Kruze consulting)
The Winds of Change
The prevailing attitude among most VCs has been ambivalent at best and dismissive at worst towards equity crowdfunding. Companies were advised not to even explore the option for fear of icing out future accredited investors in more traditional rounds. This mentality began to shift during the mad capital rush of covid from 2020-mid 2022. Monster rounds fueled by crypto, SPACs and IPOs abounded and general interest in being a part of the venture landscape increased.
In November 2020, the Reg CF rules changed again – increasing the maximum allowable crowdfunding raise from $1.7m to $5m. Working from home, more folks began to view startup investing as a reasonable path to explore, and many businesses- hurting from lockdown or otherwise unable to raise from traditional sources in the new environment, were able to raise growth capital from platforms like Startengine and Wefunder. Case in point: From 2019 to 2021, Wefunder’s monthly investment volume went up from barely $3m to over $20m. (source: https://www.linkedin.com/feed/update/urn:li:activity:6767123166398578688/)
Wefunder, specifically, attempted a re-brand of the reg CF, calling it a “community round” , touting the positive marketing impacts of offering equity ownership shares to your audience of consumers. This effort yielded positive results- with later stage companies intentionally carving out a piece of their rounds to be “community rounds”. A notable and recent example is beehive, which carved $1m of their Series B to come from equity crowdfunding.
A New Era
After the highs of the covid market, the triple impact of the crypto crash, economic and global instability in late 2022 -2023 hit the venture ecosystem hard. LPs, their capital tied up, stopped writing checks, and both VCs and startups hunkered down to survive The “VC Winter”. Early stage startups, especially, were impacted.
With VCs not returning their calls, equity crowdfunding stepped up as a powerful option for ambitious founders to try and get their companies off the ground.
Today, equity crowdfunding is more competitive than ever. With the economy not fully recovered, political turmoil, and global events regrettably no less volatile, most Americans are not falling over themselves to invest in high risk equity shares. Raising a round via crowdfunding requires a massive lift from the founder and their team. This competition for resources levels up any company that is able to effectively pitch the unnamed masses on the potential of their business and close a round.
The truly nice thing about crowdfunding is that it’s not just for startups. Restaurants, CPG brands, boat charter businesses- all can utilize these platforms to give their communities a chance to help them grow where traditional loans or investors would not. Even with the challenges of raising a crowdfunding round, it is still a more equitable and, one could argue, merit based option than traditional capital. Crowdfunding’s promise is access to opportunities for founders that pre-reg CF would otherwise not exist
Conclusion
What technological advancements are we missing out on because of lack of capital? Is it a An artificial pancreas? A new way to detect skin cancer?
Certain startup sectors are particularly suited for crowdfunding. Verticals such as biotech and renewable energy usually involve immense capital at the beginning, funding costly research and technological development before even a penny of profit is realized. True innovation doesnt come cheap. Biotech especially demands extremely patient capital- patient enough to wait for endless research, clinical trials and FDA approvals before a big pharma payoff. Beta Bionic is an example of patience rewarded.
As the world, and the market, continues to evolve, so must investors evolve their outmoded way of thinking. A successful crowdfunding raise on the cap table is not only a mark of a founder’s commitment, grit and willingness to succeed, it demonstrates that hundreds of regular people thought so too. How’s that for signal?
