Equity crowdfunding bounced back with vigour in the second half of 2020, with cannabis startups and women-led ventures leading the charge.
In it’s Crowd-source Funding (CSF) Yearbook, equity crowdfunding platform Birchal reported that just over $30 million was raised in total in 2020, down slightly on the $31 million raised in 2019.
A total of 49 deals closed in 2020, compared to 51 in 2019.
But, after the first half of the year saw a 54% drop in activity, things picked up steam in the second half, with a 31% uptick compared to the same time in 2019.
For Birchal, the final quarter of the year was its strongest yet, with $13 million raised in 22 successful campaigns.
The year also marks significant continued improvement since Birchal launched in 2018. In that year, just shy of $15.5 million was raised in 18 deals.
Cannabis on the up
In terms of industries, the most represented sectors largely reflected the trends of the year, with the COVID-19 pandemic driving investment into healthcare and fintech.
Healthcare businesses were at the forefront, with $7.14 million — 25% of the total — invested into eight companies.
The majority of these companies were in the medicinal cannabis sector, and this reflects a broader trend.
On Birchal, two cannabis businesses raised more than $1 million apiece. Montu, a business developing cannabinoid-based products and distributing them through a network of doctors, raised $2 million through its campaign in October, while Compass Lifestyle Clinics, a wellness clinic, raised $1.3 million in July.
Elsewhere, equity crowdfunding platform OnMarket hosted a wildly successful campaign from medicinal cannabis grower and supplier Cannatrek, which raised $2.5 million in December.
“Australian investors have had an insatiable appetite for medicinal cannabis opportunities for a few years now,” Birchal co-founder Matt Vitale tells SmartCompany.
Partly, he thinks this could be linked to a growing number of patients, and more doctors prescribing medicinal cannabis products.
But, he also says the efficacy of medicinal cannabis, particularly as an alternative to opiates, “is a positive trend that investors find it easy to relate to”.
There were also eight successful campaigns in the food and beverage sector, raising $6.45 million, and eight deals funded in the sustainability sector, including SeaBin’s $1.8 million raise back in March.
However, the largest number of deals backed businesses in the financial services industry. Here, nine businesses raised a total of $4.36 million from 1,693 investors.
That’s a relatively low number of backers, compared to the other sectors, suggesting that these businesses may have attracted more sophisticated, big-ticket investors.
In backing financial services businesses, the average investor pledged $2,577 — compared to $1,091 for sustainability businesses, $1,657 for food and beverage businesses and $1,975 for healthcare.
According to Birchal’s analysis since its launch, businesses that have at least one woman founder raise 25% more, on average, than those that don’t.
In 2020, women-led founders accounted for 12 of the 49 successful campaigns — just shy of 25%. Those businesses raised $8.7 million, accounting for about 29% of the total funds.
Significant raises include hot sauce success story Bunsters, headed up by Renae Bunster, which bagged $2 million in funding in August.
Equity crowdfunding has often been hailed as a way for women to access investment when VC funding is tricky to come by.
Vitale doesn’t currently have figures available for other underrepresented groups, however, he says the stats on women-led businesses are encouraging, and that there could be scope for migrant entrepreneurs or entrepreneurs of colour, and Indigenous business owners to see similar results.
In fact, reaching out to organisations focused on Indigenous entrepreneurship is a focus for Birchal in 2021, he says.
“Hopefully some exposure will encourage more BIPOC founders to consider CSF.”