Teague Egan is the CEO of EnergyX, a startup revolutionizing lithium extraction that has raised over $10 million [from both private investors, and the general public.] including from crowd-investing platforms.
A tumultuous year ended with a big win for both private companies and the public at large, with the Securities and Exchanges Commission (SEC) announcing they were amending their regulations for crowdfunding offering limits. Effective from March 15, private companies can now raise up to $5 million from every-day investors, up from just $1.07 million, providing a boost for businesses seeking capital and new opportunities for investors looking to invest in high growth startups. This democratization and decentralization signals a major change in how funding rounds will play out – and they’re a big win for sustainable investments.
Crowdfunding has become an increasingly popular form of capital-raising. Funding platforms such as Netcapital, WeFunder, and StartEngine have set crowdfunding records throughout 2020, in a move that suggests decentralized forms of investments could overtake venture capital firms as primary investment sources – all this before the SEC increased investment limits. Crowdfunding platforms, which were already opening up the market to a wider pool of people, will no doubt be bolstered by these changes.
Netcapital CEO Jason Frishman points out for Crowdfund Insider, “Not only is this impactful for issuers, but also for investors who are now going to see a wider array of companies relying on these capital raising frameworks,” he continues, “We hope that continued positive experience by investors, issuers, funding portals and the SEC will result in further increases in this cap over time.” Evident in the recent stock market action that saw actions like GameStop and AMC rise to unprecedented levels on the back of grassroot investment interest, the general public is also keen to get involved in raising capital. But what does this have to do with sustainable investments?
A 2020 report from the International Institute for Sustainable Development (IISD) indicated that millennial private investors are set to influence both the demand for sustainable businesses, as well as the investment into them. The study notes that the Millennial Generation’s spending power has overtaken Gen X’s, and will have the largest investable net wealth for the coming decade and beyond. This, along with the IISD’s predictions of a financial shift towards taking into account climate risk and sustainable investing in the coming years puts innovative, sustainably-minded businesses in a position to thrive – something we’ve noticed through EnergyX’s own experiences through crowdfunding with Netcapital.
With continued calls for drastic climate action and ever-increasing public pressure for global governance to transition towards a cleaner, sustainable model, the stage is set for an upheaval of current investment practices. Start-ups have always been part of transitions. A wide range of the appliances, services or technology in use today came from an idea that began within a start-up. The SEC’s regulation change ensures that the current and upcoming generations of start-ups have improved odds to see their ideas realised. “We can’t wait to see how the market is going to receive the increase in the cap and the types of companies that will come to portals like Netcapital to raise capital,” Frishman explains.
After 2020 saw surprising growth from crowdfunding platforms and their projects, 2021 promises to be an interesting year. Thanks to the SEC expanding the parameters, anyone can invest in high growth startup companies. The crowdfunding cap increase is a boon for everyone involved, and is sure to promote innovation and growth across a range of markets. More importantly still, the crowd is ready to take part. Should this amendment by the SEC live up to expectations, it shouldn’t come as a surprise if the cap does indeed continue to rise. Additionally, these changes are leading investments to become more democratized at a time when individuals are actively seeking to support and fund opportunities to bring about change.
The decentralization of investment sources and democratization of funding opportunities means power is going to be in the hands of the people – and all indications show that they are ready and willing to invest in the future. The massive support companies such as EnergyX have received through crowdfunding exemplifies the opportunity for companies working in sustainability clean energy to raise funds from a wider community of individual investors. The future of new businesses will be determined not by major venture capital firms, but by the public. What better way to ensure a sustainable future than helping the right start-ups get through their growing pains and raise capital to sustain and support them as they seek to improve the world?