RALEIGH — North Carolina has earned the #11 spot in the 2022 ranking of the best states for investment crowdfunding, marking 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.”
The Investment Crowdfunding Year in Review report by Crowdfund Capital Advisors ranks states based on offerings by capital raised, number of investors, cities represented, number of industries, average valuations, and success rate. Over 1,580 issuers in 690 cities across the US raised more than $507 million from over 314,000 investors in 2022, according to the report, with North Carolina’s success rate among the highest.
According to Raleigh-based Incolo, a community-based accelerator supporting NC startups and small businesses with creative fundraising strategies like investment crowdfunding, NC founders raised over $11.7M in crowd investments last year.
Founder and CEO of Incolo William McGuire told me he had a “big smile” when he saw that North Carolina had the #1 spot for ranking growth.
“I find it cool that there is a growing community of founders realizing the serious growth their companies can achieve by opening up their raises to a diverse community who wants to support their growth, regardless of check size,” said McGuire.
Crowdfunding enables people to invest in companies with small amounts of money, much less than what is required by traditional venture capital or angel funds.
Many say this has led to the democratization of capital access, benefiting investors who want to support promising companies and entrepreneurs who may not have access to traditional funding sources.
“Being able to pull the $100 investor, side by side with the $5k to $250k+ 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 it is driving the growth of investment crowdfunding.”
What’s next for NC Crowdfunding
I asked McGuire if he thinks NC will continue to climb the rankings.
“We’re predicting that $30m will be raised by North Carolina startups & pre-IPO companies in 2023 via investment crowdfunding. That would be 2x+ growth over 2022’s $11.7m,” he told me.
But he also said the “founders and their teams” are in control.
“They are the ones who provide the investment opportunity, and they can choose to include this type of round as part of their Capital Stack or keep doing what they’ve been doing as their only option,” said McGuire. “I hope they choose a ‘both and’ solution so we keep growing this amazing culture and community we love in our backyard.”
A recent Incolo newsletter stated that there are currently 15 companies with active crowdfunding raises in North Carolina.
States ranked from Best to Worst
California holds the top spot in this year’s rankings with a score of 94%.
“This makes sense when you look at the data since they lead in investments, innovation among issuers, success rate, and valuations across the state,” said Sherwood Neiss, Principal at Crowdfund Capital Advisors.
“As one can see based on the last column in the chart, state rankings can change from one year over the next,” said Jason Best, Principal at Crowdfund Capital Advisors, in the report. “So economic development offices should be paying attention to make sure they are moving up the chart rather than down. They need to look at ways to promote Investment Crowdfunding by educating innovators in their states and hosting investor training sessions.”