Equity crowdfunding is eroding the best returns VC funds used to enjoy


There’s been a sea change in Series A investment rounds that has been gradually – but persistently – eating away at venture capital (VC) funds’ highest-ROI category investments, and the reason it’s happening may surprise you.

According to Cooley’s VC trends, the median Series A valuation has moved up from $16.5 million to $23.0 million in just the past two years. VCs aren’t just competing for fewer early-stage deals, they’re also paying a lot more for them. Around the time that orange became the new black, seed rounds became the new Series A, with valuations doubling between 2012 and 2017, according to Pitchbook. (What used to be called seed-stage is now termed “pre-seed.”)

It was the JOBS Act of 2012 – creating Title III and Title IV equity crowdfunding structures – that ultimately squeezed VCs out of many of the best early-stage deals. Why? Instead of just the four percent of the population that have the income to declare themselves accredited for participating in Reg D rounds, anyone in the general public could invest in a Reg CF or Reg A+ offering.

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