If you are thinking about raising funding you probably have thought to yourself: “what are my chances for fundraising?” One way to rephrase that question is: “how many companies raise money this way every year?”
In the US, a relatively small percentage of companies raise money every year from venture capital, angel investment, SBA loans and crowdfunding. There are about 28 million businesses in the US, including lots of single person side ventures. That’s a lot of businesses!
As you can see from the infographic we’ve put together, companies successfully fundraise through these four avenues often discussed in the media at a relatively low rate. Nonetheless there are many $billions every year going into companies that are either launching or growing their young or small businesses.
What are your fundraising chances?
Venture capital gets a lot of press. It’s exciting to read about companies that have raised many millions, even hundreds of millions for their ventures. As you can see from the infographic, though, fewer than 10,000 out of 28 million businesses receive this type of funding every year. You have to be very special to join the club!
More than seven times that number of companies receive funding from angel investors. We thought it interesting that the number of small businesses that receive SBA guaranteed loans is about the same number that receive angel equity. That was surprising!
If you need smaller amounts of cash for your business, the various types of crowdfunding offer hope. Twice as many companies received crowdfunding in 2016 in the US than either SBA loans or angel investment.
It’s important to note that the largest pot of money fundraised through business crowdfunding is actually in the form of debt – $7.7 billion out of the $9.6 billion total. And according to the detailed study we read, in 2016 there was an enormous increase in “balance sheet business lending” in the US, which amounted to about $6 billion, up 260% in just one year!
That means if you have strong balance sheet assets – accounts receivable, equipment or inventory – Fintech crowdfunding is a shade of debt where you can, er, follow the crowd!
Fundraising Statistics Sources
The venture capital data is taken from the National Venture Capital Association Pitchbook report, which is compiled in collaboration with the accounting firm PWC. We downloaded their spreadsheet of historical data for Q1 2017, and averaged the data for 2014-2016, then rounded the results.
The angel investment data is drawn from the University of New Hampshire’s Center for Venture Research annual report. Again, data for 2014-2016 was averaged then rounded.
The Small Business Administration reports very detailed statistics on its two primary loan programs, 7(a) and 504. The data cited here is from the September 30, 2016 report for the full fiscal years. Yes, that means the data isn’t exactly the same as calendar year data used elsewhere, but it’s close enough! Again 2014-2016 data was averaged for the combination of the two primary loan programs.
Finally, we downloaded a very detailed report from the Cambridge Centre for Alternative Finance called “2017: The Americas Alternative Finance Industry Report.” In this case we just used 2016 annual data, because the rapid growth of this industry makes averages less meaningful than most recent year data.