If you build it, will they come? In the movie Field of Dreams, Kevin Costner’s character Ray Kinsella was promised by a mysterious Voice that if he built a baseball field in the middle of an Iowa cornfield, “they”- ghost baseball players which ultimately included his deceased father – would come. As the formerly cynical, suspicious sportswriter Terrance Mann (James Earl Jones) promised would happen, Ray’s faith in the Voice was rewarded. 
The same question might be asked about Crowdfunding Portals, although with decidedly less fantasy and romanticism and no sign of James Earl Jones: If you build it, will they come?
So far, 36 portals have registered with FINRA under Regulation CF, which went effective on May 16, 2016. Two registrations have already been withdrawn, leaving 34 portals in various stages of activity and levels of success.
In order for a crowdfunding portal to be successful, it needs at least two things – deal flow and investors. Without deal flow, investors have no reason to visit a site. Without investors, and a history of success, issuers will be reluctant to rely upon a portal to raise money for it. Starting a new portal, with an attractive website and a catchy name, is not enough to assure that both issuers and investors will use it. Perhaps some portals will invent the better mousetrap, maybe through an industry niche approach or just good, old-fashioned marketing, and develop a critical mass of deals and investors, but I would be surprised if many of the current registrants do not simply fade from view for lack of traction.
The crowdfunding rules, as originally proposed, had many roadblocks for would-be users. The final rule, which was effective on May 16, 2016, made a few adjustments which should promote more usage, but the jury is still out. Like Terrance Mann, I was once completely cynical and suspicious about the viability of crowdfunding portals, but I am now willing to give the concept a chance to succeed. (I actually think crowdfunding that is locally flavored and that generates investors through established social networks and customer bases is more likely to work than broad-based national approaches. Some research seems to bear that out.)
According to statistics provided by one of the portals, WeFunder, approximately $50,000,000 has been raised in successful crowdfunding projects since last May’s effective date. 162 offerings have been funded, and about 59,000 investors have participated in those offerings.
And, as we might expect, a few of the portals have been much more successful than the rest. The aforementioned WeFunder has been responsible for over half of the money raised and 84 of the offerings. Second place goes to StartEngine, with almost $10,000,000 raised, and Indiegogo following with almost $7,000,000 in capital. According to the WeFunder data, of the 34 portals, 27 have so far apparently completed no successful offerings.
The portals are scattered across thirteen states and Canada, with California having by far the most, 13.
The portals are not carbon copies of each other. Some, in addition to hosting (or seeking to host) Regulation CF offerings, also allow issuers to use their websites for Regulation 506(c) offerings, and Regulation A+ offerings. Accordingly, some of the portal owners either are, or have as affiliates, registered broker-dealers and, in a few cases, investment advisers.
Some portals appear to specialize in certain industries, while most do not. The portals have different curation standards, from the minimum required by the Regulation to what appears to be much more in-depth vetting. The portals offer different levels of assistance to issuers – a few have extensive documentation libraries, and most promise some level of assistance to issuers in completing the requisite Form C needed to engage in crowdfunding. Some portals focus on certain capital formation approaches, such as revenue sharing notes, while others are more flexible. Most allow deal browsing without setting up an account, but a few require accounts to be set up before the website can be viewed.
FINRA maintains a list of the portals registered with it, with website links and other information. We will endeavor to keep this list updated periodically, but the best way to learn about a portal is to pay it a visit and explore yourself. As the Crowdfunding industry matures, there will obviously be successes and failures, with new entries into the market and certainly some departures.
How many portals a stable crowdfunding market will support obviously remains to be seen – probably a few more than there are mystical baseball fields in Iowa, but maybe not many as the market matures and issuers and investors alike realize that the goals of crowdfunding may be better served through a few, active national portals and maybe some niche players, rather than a scattershot approach.
. The location for the movie Field of Dreams really exists in Dyersville, Iowa. I saw no ghosts during my visit there, but I did find a waterlogged baseball in the adjoining cornfield.
Parker MacIntyre provides legal and compliance services to securities issuers, including small businesses, investment advisers, broker-dealers, registered representatives and hedge funds, among others. Our capital formation practice group assists businesses with the complex issues that arise in the course of raising capital at various stages of their formation, operation and growth, including compliance with federal and state laws and rules. Please visit our website for more information.