Investment Crowdfunding Issuers
Prove More Resilient
👉In the ever-changing business world, longevity is often dictated by access to capital, market demand, and the ability to adapt. Traditional funding models—venture capital, bank loans, and private equity—have long been considered the gold standard for financing a company’s growth. Yet, new data challenges this assumption, revealing that businesses funded through Regulation Crowdfunding (RegCF) are surviving and thriving at rates that defy conventional wisdom.
The latest Crowdfund Capital Advisors (CCA) analysis presents a compelling counterargument to the outdated perception that Investment Crowdfunding is a last-resort option for struggling businesses. Instead, the data suggests that RegCF-funded companies outperform traditionally funded businesses regarding survival rates, reinforcing the idea that crowdfunding-backed companies may represent a stronger, more resilient class of businesses.
For decades, research has shown that half of all new businesses fail within their first five years, a sobering statistic reported by the U. S. Bureau of Labor Statistics (BLS). However,an analysis of nearly 8,000 issuers funded through RegCF tells a very different story:
The Bureau of Labor Statistics reports that approximately 50% of all new businesses fail within five years. Yet, our analysis of nearly 8,000 companies engaged in Investment Crowdfunding tells a different story. Here, only 25.5% of funded companies have gone out of business, a stark contrast to the national average,” says Sherwood Neiss, Principal at Crowdfund Capital Advisors. “This is a significant finding that underscores the viability and strength of Investment Crowdfunding as a funding mechanism.”
The failure rate for businesses funded within the past five years drops even further to just 20.7%, demonstrating the sustainability of crowdfunded ventures over time.
This data challenges assumptions and demands a reassessment of how we measure business success. Investment Crowdfunding is not a dumping ground for companies that couldn't raise capital elsewhere. Instead, it may be one of the best-kept secrets for business longevity.
📊[Chart: Business Survival Rate by Year Issuer Raised Capital]
🤔What About Companies That Failed to Raise Capital?
If RegCF-funded companies are proving to be twice as resilient as the average business, what about those that attempted but failed to secure funding through Investment Crowdfunding?
Interestingly, even unsuccessful issuers that launched offerings but did not meet their funding targets still outperformed the average business tracked by the Bureau of Labor Statistics. Among issuers that failed to raise capital, the survival rate drops to 59.7%, bringing it closer to traditional failure rates.
This insight is critical for two reasons. First, it suggests that businesses that do not secure capital are naturally more vulnerable, reinforcing the importance of adequate funding for long-term success. Second, even these unsuccessful issuers still perform slightly better than the broader business population tracked by the BLS. This suggests that companies willing to seek external funding—whether they secure it or not—may already have characteristics that make them more resilient than the average small business.
The data challenges the misconception that only “weak” businesses turn to crowdfunding. In reality, companies that successfully raise capital through RegCF emerge as some of the strongest players in the private market.
📊[Chart: Percent of Companies Still in Business: Startup (less than 3 years old) vs Established]
Beyond survival rates, the data reveals a direct correlation between revenue, capital raised, and long-term business viability. Companies that secure larger crowdfunding rounds or generate higher revenue tend to last longer.
Businesses with revenues over $5 million have a staggering 96.3% survival rate, while those under $1 million have a still-respectable 77.2% survival rate. Similarly, companies that raised over $1 million through RegCF have a 90.3% survival rate, compared to 74.8% for companies that raised under $250,000.
💡This reinforces a clear takeaway:
"Higher funding targets correlate with better business resilience,” says Neiss. “When companies raise enough capital, they have the runway to execute their vision. This underscores the importance of giving RegCF issuers more flexibility to raise larger sums, rather than capping them at an arbitrary $5 million.”
📈Investment Crowdfunding vs. Traditional Startups: A Risk Perspective
🚀Startups have long been considered high-risk ventures, yet the data suggests that RegCF-funded startups defy this assumption. Startups funded through crowdfunding boast a 74.8% survival rate, far exceeding expectations and reinforcing that crowdfunding-backed businesses have a higher chance of success than many of their traditional counterparts.
🚀Established companies over three years fared even better, with an 85.5% survival rate. This indicates that crowdfunding is also being leveraged by more mature businesses seeking capital to scale further.
🚀Perhaps most compellingly, the success of women's and minority-led businesses in RegCF suggests that crowdfunding is not just a funding tool but a mechanism for fostering diversity and inclusion in entrepreneurship.
🚀83.8% of women-led companies remain operational, compared to 86% of male-founded companies.
85.1% of minority-founded businesses continue to operate, closely mirroring non-minority-founded firms at 85.6%.
“These numbers don’t just prove that RegCF works,” says Neiss. “They prove that when given equal access to capital, diverse founders perform just as well—if not better—than the traditional business landscape.”
🤙A Call for Policy Change: Raising the Cap to $20 Million
Given the remarkable survival rates of RegCF-funded businesses, Neiss argues that the current $5 million fundraising cap for Regulation Crowdfunding is unnecessarily restrictive.
“Far from being a haven for ‘bad seeds,’ these platforms appear to be nurturing businesses with a higher propensity for survival,” Neiss explains. “It’s a testament to the power of community support, due diligence, and the democratization of funding.”
He believes the next logical step for policymakers is to raise the RegCF cap to $20 million, enabling more companies to secure the capital they need to sustain long-term growth.
“If the numbers show that RegCF-backed businesses outperform traditionally funded startups, why are we arbitrarily capping their growth potential?” Neiss asks. “Raising the cap would allow more businesses to scale, create jobs, and contribute to the economy—without relying on traditional gatekeepers.”
Yvan De Munck - @regcfrocket
CClear, Inc.
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