Comparing B2C and B2B Trends in Equity Crowdfunding

CHART OF THE WEEK 📈

By Brian Belley | Read

There’s a common belief among founders and investors regarding equity crowdfunding. The belief is that consumer-focused companies tend to perform better at raising capital from the crowd than enterprise-focused businesses. But is this belief true? And in terms of investment outcomes, does investing in consumer-focused companies lead to higher potential returns for investors?

In today’s Chart of the Week, we’re diving into the data to explore how B2C (business-to-consumer) and B2B (business-to-business) companies stack up in terms of offering counts, valuations and revenues, investment outcomes, and capital raised. 

• In the early stage, median valuations for B2B and B2C distribution models are relatively uniform, at around $10 million, regardless of the distribution model. 

• However, at the Growth Stage, B2B companies commanded nearly 66% higher median valuations ($50 million) compared to B2C companies ($30 million) - despite B2B companies having a lower median annual revenue and growth rate.

• Although one-third (1/3) of all equity raises are consumer-focused (B2C), the remaining two-thirds (2/3) are either pure B2B or hybrid distribution models. Therefore, the data does not clearly show a strong skew towards B2C businesses in Reg CF raises since 2023.

• While failure rates for B2B and B2C companies have been similar to date (2.3% and 2.7%, respectively), B2B companies have achieved a higher relative number of exits, including a 3X increase compared to pure B2C companies.

• In terms of capital raised, B2C companies raised more than B2B businesses ($123k vs. $97.7k, respectively) but had smaller median check sizes ($1,383 for B2C vs. $2,078 for B2B). This suggests that consumer-focused companies may attract more lower-dollar investors than enterprise-focused distribution models.

To learn more, including charts on the overall breakdown of B2B vs. B2C in equity crowdfunding, investment outcomes, and capital raised, click HERE.

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PITCH REVIEW 💸

By Léa Bouhelier-Gautreau \ Deal Report

Brief: Farm To Flame Energy is leading the renewable energy sector with its technology that converts biomass waste into clean, smokeless, and odorless electricity. Targeting commercial buildings, this patented combustion process offers an eco-friendly and cost-effective alternative to traditional power sources, operating at half the cost of diesel. Their generators are already in practical use, powering electric vehicles and appliances. It’s raising $5M with a Pre-Money Valuation of $50M and a minimum investment of $100.

Key People: CEO Kwaku Jyamfi, a chemical engineering graduate from Syracuse University, has steered the company to profitability since its inception in 2018, securing major contracts and developing the innovative FTF 30KW Generator. Head of Accounting Carla Lam, with over 24 years of experience, provides a strong financial backbone. Plant Manager Fred Lewis, with 35 years in power generation, and Systems Engineer Ric Airesman, with extensive experience in generator operations, round out the team.

Summary

Here's what we like: Farm To Flame Energy's innovative approach to generating clean electricity through a patented combustion process represents a significant advancement in the energy sector. This approach, leveraging biomass waste to produce electricity, addresses environmental concerns and offers a sustainable solution to energy supply challenges. The company's ability to provide smokeless and odorless generators for commercial buildings and its application in charging electric vehicles and other electric appliances underscores its versatility and the relevance of its technology in today's increasingly eco-conscious market.

The signing of a $20 million contract with Cocoa Processing Company for a 5MW combined heat and power plant exemplifies the strong market demand and commercial viability of Farm To Flame Energy's technology. This, coupled with a profitable business model and a revenue growth trajectory, signals robust financial health and operational efficiency. 

Supported by notable investors like the Cisco Global Problem Solver Challenge and the Richard King Mellon Foundation, as well as participation in multiple accelerators such as Reach, Syracuse CoE, and Cleantech Open, Farm To Flame Energy has demonstrated its ability to attract substantial support and recognition. 

Here's what we don't: Despite Farm To Flame Energy's innovative approach to generating electricity from biomass waste, several factors contribute to a bearish outlook on its investment potential. First, the company's $50 million valuation appears high, especially when considering its 2023 revenue of $149,582.00. The company's $24.4 million in signed contracts can help justify an increase in valuation since its last round, but the current deal price could lower investors' returns.

The high capital intensity inherent in the energy sector, combined with its high barriers to entry, suggests that significant further investment will be required for expansion and to maintain competitiveness. This could dilute existing shareholders or increase financial strain on the company.

Furthermore, the company operates within a moderately competitive landscape featuring notable direct competitors such as BrightWave and CapCO2 Solutions Inc. The presence of these established players could hinder Farm To Flame Energy's ability to capture market share, particularly in industries as complex and regulated as energy and power.

LAST WEEK’S POLL RESULTS

Would you invest in Neighborhood Sun?

🟨🟨🟨🟨🟨⬜️ 👍 (50)

🟩🟩🟩🟩🟩🟩 👎 (53)

103 Votes

By Sam Fiske \ Listen

In this episode of Inside Startup Investing, Chris engages with Annette Azan, the founder and CEO of Nuudii System, a company pioneering the "boobwear" category that offers an alternative to traditional bras and bralettes. Annette discusses her journey from the fashion industry to entrepreneurship, driven by her need for a comfortable yet supportive option under a wedding dress. She gets into how Nuudii System is designed to embrace the natural shape without reshaping, promoting body positivity and versatility in wear.

STAFF PICKS 🌶️

By Léa Bouhelier-Gautreau 

Authors A.I.

Authors A.I. is impacting the publishing landscape with its advanced AI platform, Marlowe, which assists authors in fiction writing. The company leverages AI to enhance storytelling by providing AI-assisted editing services that analyze narrative structure, pacing, character development, and more. This approach helps authors improve their manuscripts while keeping them central to the creative process.

• Pre-Money Valuation: $8.7 million

• Minimum Investment: $250

VSYN+

VSYN+ is a video streaming service catering to the deaf and hard-of-hearing community. As a platform dedicated to sign language entertainment, VSYN+ offers high-quality movies and shows created by deaf filmmakers, filling a significant gap in the media landscape. Operating on a subscription-based model with additional revenue from advertising, sponsorships, live events, and merchandise, VSYN+ launched in the US on iOS in February 2024 and plans to expand to Android, Roku, and web streaming by spring 2024.

• Pre-Money Valuation: $28.8 million

• Minimum Investment: $100

Universal Transit

Universal Transit aims to disrupt the auto transportation industry with its AI-based platform, founded by Giorgi Milorava in October 2020. The platform enhances efficiency and profitability by improving metrics like on-time pickups, deliveries, and route profitability. In 2023, the company generated $9.6 million in revenue. Universal Transit balances predictability and flexibility in the global inventory management software market, serving both B2B and B2C segments.

• Valuation Cap: $28 million

• Minimum Investment: $250