Early-stage businesses that seek crowdfunding are experiencing lower growth rates, compared to Private Equity or Venture Capital backed businesses, according to new research

Accounting and advisory firm Price Bailey has released a report revealing that early-stage businesses who received funding from the crowd, experienced lower growth than those who sought Private Equity and Venture Capital investment.

Using the research database Beauhurst, the firm retrieved data on 1,075 Crowdfunded businesses and 3,472 Private Equity and Venture Capital (PE/VC) funded businesses, that had experienced a funding round that raised at least £500k, between FY Q1 2016 and FY Q3 2023.

The data reveals that “seed stage” businesses, who went to the crowd for funding, raised on average, £1.1m with an average turnover of £141k at the point of investment. In contrast, seed-stage businesses who sought investment from PE/VC investors, raised on average, £2.9m with an average turnover of £1.3m for said round.

The data goes on to show that at the “venture stage”, crowdfunded ventures had an average cheque size of £1.4m with an average turnover of £2.8m at the point of investment. Comparatively, those who went to PE/VC investors raised, on average, £4.4m in their first round with an average turnover of £3.2m at the point of investment.

Total amount raised and average cheque size for respective significant rounds

Commenting on the report, Chand Chudasama, Partner and Strategic Corporate Finance expert at Price Bailey says:

“From our research, we can see that regardless of where these businesses are sourcing their investment from, it has been a challenging time. This is no surprise, given the prevailing economic uncertainty over the last few years, but there has been a sharp and distinct decline in investment deals from the heights of 2021.
“It’s also clear that at both stages of evolution (Seed and Venture), those businesses that went to the crowd are seemingly at the smaller end of the stages, while those who went to PE/VC investors are at the larger end.

“There also appears to be a split in investment source for consumer and B2B businesses, with the majority of consumer businesses seeking the crowd for investment, while B2B organisations seek PE/VC investment the majority of the time.”

“I hope the findings from our report will be useful for early-stage business owners, looking for information on the best route for fundraising, as they grow their organisation.”

Access the full report here.

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