September 5, 2019

Trends In Software Investment

 

I saw a commercial the other night for the new DirectTV remote that is powered by Google Voice. In addition to changing the channel, now you can control your lights, your thermostat, and your speakers all through your TV remote. 

There is no shortage right now of smart technology and products that fall under the Internet of Things (IoT) label. Powering all these innovations are advances in software and technology. And it appears that a fair number of the young startups fueling these advances have found Reg CF to be a viable source of funding. That’s why this week, the focus is on Software companies.

Software companies make up a significant portion of the offerings in our database, with 217 offerings (20%). The interesting thing about this group of offerings, is that while other industries I’ve taken a look at seem to “share the wealth” and spread out their offerings across platforms, nearly half (45%) of all offerings are posted on StartEngine, with the nearest competitor (Wefunder) only getting 15% of the offerings. 

When it comes to the success rate of these offerings, Software offerings succeed slightly more than they fail, meeting their target offering 53% of the time. But while StartEngine is the most frequently used offering platform, it does not have the highest success rate of offering platforms. That title belongs to Republic, where 24 of the 28 offerings listed have hit their target. StartEngine actually falls below the overall average success rate, at 41% (the lowest success rate of all platforms with more than 1 offering). 

On average, these offerings are looking to raise a minimum of $39,000, which is just under the average offering minimum we have seen in the past year. And it may be a function of these low offering minimums, but the average amount raised for the successful offerings in the sample is $118 thousand, with one offering maxing out at $1.07M (Solutions Vending International), and only two other offerings raising over $500 thousand. This average comes in below that of Retail, Medical, and Food and Drink. This could potentially be a function of the low targets, but may also be related to the low valuations of these companies ($7.7M)

The software companies of today look a lot different than my concept of software as a kid (anyone remember Roller Coaster Tycoon…it’s back in app form now!). Firms seeking to raise money through Reg CF include a company that makes coding robots of girls, an all-in-one urban planning platform, and the grocery store of the future. The software umbrella is quickly expanding (almost as much as the IoT universe), and there are a number of companies out there looking for your investment. So now’s the time to turn to your Google Home and say “Hey Google, find me a software investment!”


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About: John aland

John is an Accounting PhD candidate at the University of Michigan’s Ross School of Business. His research interests include crowdfunding, disclosure, and debt contracting. Prior to Michigan, he worked as an auditor at KPMG in Philadelphia for seven years, leaving the firm as an audit manager. John has a BS in Accountancy from the University of Notre Dame. He can be reached at alandj@umich.edu.

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