Woodie Neiss, Principal at Crowdfund Capital Advisors and Thunderbird alum, was puzzled.
He had just launched a new crowdfunding index that he created with two Thunderbird first-year students, Alex Nagel and Sophie Dessart. The index was a valuable tool for investors, companies, and newcomers to the crowdfunding world, measuring just how much money was being raised every day by top companies in the industry.
In spite of this success, there was something bothering Woodie. Alex and Sophie had accomplished their work on the index without wearing any white t-shirts.
Woodie, a Thunderbird alum from the Class of 1996, was infamous for always wearing white t-shirts to class. So infamous, in fact, that Professor Michael Moffett still loves to regale his finance students with tales of Woodie and his white t-shirts. The success of Sophie and Alex without the support of white t-shirts was shocking.
Whether they were wearing white t-shirts or not, Woodie, Sophie, and Alex did publish the index last week. Using data from Crowdfund Capital Advisors’ data platform, the CCA Online Investment Index measures the capital-raising activity of private U.S. companies soliciting funds under Regulation Crowdfunding and Rule 506(c) of Regulation D of the JOBS Act. The act, which was based on a framework cowritten by Woodie himself, was revolutionary in the crowdfunding industry, allowing companies to raise funds from non-accredited investors via crowdfunding. This means that the general public, including Woodie, Sophie, and Alex, can invest in companies without having to meet the SEC’s requirements for being an accredited investor, which can include stringent rules like having a net worth exceeding one million dollars.
This regulatory change has allowed companies, particularly small and medium-sized enterprises (SMES), to more easily raise funds through crowdfunding. Since the launch of the industry in 2016, almost $1 billion has been invested. The growth of the CCA index shows how more and more companies have been taking advantage of Regulation Crowdfunding.
Sophie highlights this concept when discussing the index. “Each year, we’ve seen the crowdfunding index grow in size,” she notes. “This is an exciting trend for small businesses and firms that can’t access capital through traditional avenues like bank loans, angel investors, or venture capitalists, giving them an opportunity to grow their business through crowdfunding. Ultimately, we’re witnessing the democratization of the investment industry with the rise of crowdfunding.”
Alex agrees. “The index has grown year after year, but the increases seen from FY 2020 to FY 2021 have been remarkable,” he emphasizes. “We are almost consistently seeing index values during FY 2021 that are twice as high as the year prior. This is a strong indicator of the growth of the crowdfunding industry including accessibility, availability, and investors bullish on getting involved with some great companies.”
Looking at the index also can show the strength of the companies currently raising funds or the enthusiasm of investors. The index measures the capital raising intensity of the top 50 companies that are getting the highest investments each day, meaning that a higher index value can indicate investor fervor and belief in the strength of companies that are currently raising funds.
The index has become even more important in the wake of new changes by the Securities and Exchange Commission, which went into effect in mid-March and raised the amount that businesses can raise under crowdfunding regulations. “Now startups and SMEs can raise up to $5 million online from customers, friends, family, followers, etc.,” Woodie says. “The week prior to the SEC changes, the index averaged 310, which is impressive as it shows the momentum of the industry to date. Once the changes went into effect, the index jumped to 1,481. This was led by 3 issuers who hit the $5 million cap in that week alone!”
As the crowdfunding industry grows and develops, the CCA Online Investment Index will become an even more important tool for investors, businesses, regulators, and the general public to understand relevant industry trends.
Woodie’s main takeaway from the success of the index was a little different, though. “It does prove that great things can be accomplished with black, blue, green, etc. t-shirts,” he muses.