RALEIGH – North Carolina earned the #11 spot in the 2022 ranking of the best states for investment crowdfunding, an impressive 17-point jump from its 2021 ranking – the highest jump in the country.
Investopedia defines crowdfunding as “the use of small amounts of capital from a large number of individuals to finance a new business venture.”
A review report by Crowdfund Capital Advisors ranks states by year of investment crowdfunding proposals raised capital, number of investors, cities represented, number of industries, average valuation and success rate. More than 1,580 issuers in 690 U.S. cities raised more than $507 million from more than 314,000 investors in 2022, with North Carolina having the highest success rate, according to the report.
According to Raleigh-based Incolo, a community-based accelerator that supports NC startups and small businesses with creative fundraising strategies like investment crowdfunding, NC founders raised more than $11.7M in crowd investment last year.
William McGuire, Incolo’s founder and CEO, told me he had a “big smile” when he saw North Carolina ranked #1 for growth rankings.
Study: North Carolina rises to No. 16 in state innovation rankings
“I think it’s great that there’s a growing community of founders that can achieve growth by opening up their companies to a diverse community that wants to support their growth, regardless of check size,” McGuire said.
Crowdfunding enables people to invest in companies with small sums of money, much less than traditional venture capital or angel funding would require. This has led to the democratization of access to capital, benefiting investors who want to back promising companies and entrepreneurs who lack access to traditional funding sources.
“Being able to attract a $5k to $250k+ investor as well as a $100 investor creates new serious growth potential that early stage companies have never had access to before,” said McGuire. “And I think founders are waking up to that reality, and that’s driving the growth of investment crowdfunding.”
I asked McGuire if he thinks NC will climb the rankings.
“We’re projecting that North Carolina startups and pre-IPO companies will raise $30 million through investment crowdfunding in 2023. That’s a 2x+ increase from 2022’s $11.7m,” he told me.
But he also said that “founders and their teams” are in control.
“They’re the ones offering the investment opportunity, and they can choose to include this type of round as part of their capital stack or to keep doing what they’re doing as their only option,” McGuire said. “I hope they choose the ‘both and’ solution so we continue to grow this wonderful culture and community that we love in our backyard.”
A recent Incolo newsletter said there are 15 companies raising active crowdfunding in North Carolina.
States ranked from best to worst
California topped this year’s ranking with a score of 94%.
“It makes sense when you look at the data because they lead to investment across the state, innovation among issuers, success rates, and valuations,” said Sherwood Neiss, principal at Crowdfund Capital Advisors.
“As can be seen in the last column of the chart, state rankings may change over the next year,” Jason Best, principal at Crowdfund Capital Advisors, said in the report. “Economic development offices must therefore take care to move the chart up, not down. They should look at ways to promote investment crowdfunding in their states by educating innovators and holding investor training sessions. “
The first civilian deal for a Silicon Valley bank could be a big growth opportunity for Triangle, leaders said