The Impending Advertising Crisis Within Equity Crowdfunding

This could become a real problem for equity crowdfunding.

From the investor side of things, this isn't really something people tend to think about, but for founders and portals, it's an everyday struggle. There are a host of reasons for all of this, and not every company is the same, but there is an impending advertising crisis, and it might start to hurt the equity crowdfunding world.

Equity crowdfunding is in a weird spot right now because while it is big and growing rapidly, it's still relatively small in many respects. Compared to the VC world, the amount of money raised by Equity Crowdfunding is a drop in the bucket. VCs can pump hundreds of millions of dollars into a single company on a single deal, whereas equity crowdfunding might only raise a couple hundred million for an entire year. That being said, individual raises, on average, are consistently getting larger. Further, large raises are getting consistently larger on the top end, and the sector is consistently growing very quickly.

That being said, the main way companies raise money is by bringing in their own investors, then companies will advertise through various means to bring in new investors to bolster that raise. Further, most large portals have communities of investors like myself that frequently check out the sites to look for good investments. All of these play a part in a raise, but with more companies raising on StartEngine, these factors are becoming consistently less effective.

Now, to get this out of the way, not all companies deserve to be funded. If a company is just a plain lousy investment, then this doesn't apply. Some companies are just such bad investments that I wonder how they even got on these platforms, more or less why founders stuck with the companies. That being said, how much a company raises are rarely determinative of how much money they raise. I have seen tons of companies that are absolute dog water get fully funded into the millions and amazing companies that barely raise enough to cover the cost of their raise. In theory, better companies might be able to raise more money if they advertise, but that's rarely the case.

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