Statistics Regarding Odds of Success in Obtaining Capital Financing

Business requires controlled risk-taking.  We all seek to minimize our risk and maximize the opportunity for gain.  We do this by following paths that have worked for others in hopes that these paths will work for our advantage.  With that thought in mind, we have compiled some sobering statistics regarding private placement securities offerings that have taken place since the JOBS Act rule change went into effect in September of 2013.  We obtained this information from a research paper produced by the United States Securities & Exchange Commission (SEC) that was published in August of last year.

In this research paper the SEC researchers compiled a vast amount of information (you can read the whole report here):

  • More than $3 trillion in capital was raised via private placement offerings in 2017 (IPOs raised only around $55 billion by comparison).
  • More than 37,000 offerings were undertaken in 2017 under Regulation D and completed.
  • Regulation D offerings make up more than 99% of the capital raised in the capital markets during that time period.
  • Between September 2013 and December 31, 2017 more than $183.3 billion in capital financing was completed pursuant to the Rule 506(c) exemption.
  • The $183.3 billion in capital financing completed was represented by 7,110 offerings (an average of more than $25 million per offering).
  • The 7,110 offerings were completed by 6,690 issuers (i.e.: 6,690 companies completed offerings under the new rule in that time period (that’s an average or more than 4 each and every day of the measurement period).
  • More than 398,000 accredited investors participated in these offerings.

Contrast this with the following sobering statistics:

  • More than 4 out of 5 companies seeking capital fail to obtain it.  They are not using this rule exemption and pay the price for not knowing they actually have a workable alternative to prevent failure.
  • More than 4 out of 5 public offerings (i.e.: offerings that can be publicly advertised such as IPOs and Rule 506(c) private placement offerings) routinely succeed.

How would you calculate your risks of success or failure now that you know what is really going on in the markets?