Tax Day Insights: Average Investment Crowdfunding Holding Periods

CHART OF THE WEEK 📈

With the April 15 tax day upon us, investors making new investments today might be wondering how long they might expect to hold an investment before seeing a taxable event, such as an exit or failure. 

From an analysis of 256 investment crowdfunding exits and failures to date:

• The average holding period for an investor from a company’s first online capital raise was 2.5 years (median of 2.3 years). 

• 35 exits (14%) took place less than one year after their first online capital raise, suggesting investors may have had to treat any potential gains or losses as short-term capital gains. However, the majority of exits and failures (86%) may allow investors to treat gains and losses as more favorable long-term capital gains.

• 11 exits (4%) took over 5 years from the company’s first capital raise. We expect this number to increase as the investment crowdfunding industry continues to mature, since the first-ever deal only went live in May 2016.

• Surprisingly, the two types of exits that would tend to be associated with more positive outcomes - IPOs and M&A - haven’t yet shown longer average holding periods than the negative outcomes. 

• While IPOs are typically perceived to take the longest from company founding, the 21 companies that have had IPOs thus far only averaged 2.3 years from their first crowdfunding round to 6 months from the last crowdfunding round until IPO. This suggests that companies are using investment crowdfunding more as a bridge round just prior to an already-planned IPO.

• Given that the median Reg CF company is only 2.3 years since their last funding round, we expect to see more positive outcomes with much longer holding periods as the industry continues to mature.

To read more in-depth on crowdfunding exits and failures, read Brian Belley’s full story HERE.

Join our upcoming investment webinar to learn about becoming an investor in KingsCrowd, trusted by angel investors and VCs alike. Discover why KingsCrowd represents a compelling investment opportunity, and take advantage of a live Q&A session with the founder to address your specific inquiries.

Don't miss this opportunity to join a movement shaping the future of alternative investing. We look forward to sharing our journey and successes with you on April 23rd at 1PM EST.

PITCH REVIEW 💸

Brief: Apis Cor is leveraging advanced robotics to 3D print full-scale houses, significantly reducing building costs for developers and homebuilders. This innovation extends from creating a tiny home in a snowy tundra to constructing the world's largest 3D-printed office in a desert metropolis, alongside a commercial structure in Texas, and winning NASA’s 3D-Printed Habitat Challenge. It’s raising $3.6M with a Pre-Money Valuation of $200M and a minimum investment of $250.

Key People: CEO Anna Cheniuntai, transitioning from a background in space physics and large-scale project management, including a multi-million-dollar Olympic Games project, has garnered recognition as a leading CEO in the sector, contributing to various leadership and technological councils. CTO Nikita Cheniuntai brings a decade of experience in construction and industrial machinery, enhancing the company’s technical and managerial capacities.

Interested in Apis Cor? Access the deal report HERE 🔓📈

Summary

Here's what we like: Apis Cor's innovative approach to construction through 3D printing positions it at the forefront of a transformative wave in the real estate and construction industry. The company's technology is cutting-edge and addresses key issues in the sector, such as high building costs and prolonged construction timelines. By offering a solution that promises to reduce expenses and accelerate building processes, Apis Cor is tapping into a high-potential market ripe for disruption.

From constructing the world's largest 3D-printed office to winning NASA's 3D-Printed Habitat Challenge, Apis Cor has shown that its technology can withstand diverse environmental challenges and meet various construction needs. With a recurring revenue model, Apis Cor can build long-term customer relationships and ensure a steady income stream. This, coupled with its strategic partnerships, including an investment from D.R. Horton, one of America's largest homebuilders, highlights the industry's belief in the viability and future success of Apis Cor's technology.

The company's participation in the Alchemist Accelerator, alongside investments from Build Tech VC, Other People's Capital, Asymmetry Ventures, At One Ventures, and One Ventures, provides it with capital and access to a network of seasoned advisors and industry experts.

Here's what we don't: Apis Cor's bullish valuation of $201 million is a significant cause for concern, particularly when considering its current financial performance. With a reported annual revenue of just $54,849 and a concerning decline of 75.7% since the last round, the revenue multiple of 3,664x seems exorbitant and suggests that the company is substantially overvalued. Even if the company has the potential to become a unicorn, it hasn't made enough progress since its last round to justify doubling its valuation.

Apis Cor also operates in an industry with high barriers to entry, which typically demands substantial capital investment for research, development, and scaling operations. Established players in the 3D printing construction sector, such as Mighty Buildings and COBOD, also face stiff competition, which could limit market share growth and pressure the company to secure lucrative contracts.

Additionally, Apis Cor faces strong adoption risks. Designers might have to change their habits, and construction companies might have to update their processes and grow their warehouses to store the robots. As with any brand-new market, investors cannot ignore the adoption risk — including the timeline to widespread adoption. The more novel the product, the longer it often takes users to accept it.

PRODUCT UPDATES

Watch KingsCrowd's VP of Product, Brian Belley, as he introduces significant enhancements to the Portfolio tool for free and paid users. These updates include a new feature allowing users to track a broad range of investments, not limited to crowdfunding platforms. We also debut the Tax Center. This tool simplifies the tracking of investment outcomes, providing summaries of exits and failures, both recorded and potential, and automatically calculates returns and tax implications based on user-inputted data.

Watch our latest product updates.

STAFF PICKS 🌶️

Aura Health

Aura Health, formerly known as Aura, offers a mental wellness marketplace that combines content, coaching, and community support, providing a holistic approach to mental health care. With over 8 million users and $25 million in lifetime revenue, Aura Health is becoming a prominent figure in the digital mental wellness arena. The platform supports mental health professionals in transitioning to digital services, thereby increasing their accessibility. Users benefit from personalized services tailored to their specific mental health needs, enhancing the effectiveness of the support provided.

• Pre-Money Valuation: $60 million

• Minimum Investment: $1,001

Cadence OTC

Cadence OTC is dedicated to making birth control widely accessible by selling it over-the-counter without the need for a prescription. Cadence OTC is actively working with the FDA to transition birth control pills to over-the-counter status through the Rx-to-OTC switch process. With a revenue run rate of $3 million and an exclusive partnership with the leading distributor of healthcare products in 180,000 US convenience stores, the company is positioned for significant impact.

• Valuation Cap: $73 million

• Minimum Investment: $250

Immigrant Food

Immigrant Food is an aspiring fast-food restaurant chain that combines gastronomy with social advocacy, highlighting the rich culinary traditions of immigrants in America. Facing the challenge of introducing varied ethnic foods to a broader audience, Immigrant Food's success relies on consistently high-quality and appealing offerings. Since its launch in January 2019 by Peter Schechter and Tea Ivanovic, the company has seen significant success, generating $4.3 million in revenue in 2023 with a 33% growth rate and a 15% profitability margin.

• Pre-Money Valuation: $7.5 million

• Minimum Investment: $497