❌ the worst month for startup investing

Welcome to this week’s edition of CROWDSCALE, where everyone gets a Disney FastPass® ticket to startup investing. In today’s newsletter:

• 📉 Freefalling: Preparing for the worst month in equity crowdfunding

• 🔊 Listen Up: I joined Wefunder’s podcast to talk about…startup investing. duh.

• 🔥 3 Hot Raises: Sharing three hot startups that caught my eye

We’re headed off a cliff. In just 30 days, the flow of startup investing is about to freefall with no parachute and no soft landing.

Based on historical data, startup investing for retail investors is set to drop 44% next month. And it’s actually a good thing for investors.

In past years, the number of raises & investment typically plummets in May. Take 2022 for example - the number of actively raising startups dropped 32%, and the amount of investment declined by $51M.

No platform or sector is spared, and there’s a very specific reason for the drop.

It all has to do with regulation, specifically around financial disclosures. Companies that are raising funds via equity crowdfunding are required to submit audited financials to the SEC.

Companies typically provide two years worth of audited financials. Once May comes around, companies are obligated to show audited financials for the previous year’s operation. These audits take time and cost anywhere between $5,000-$25,000.

Many startups don’t want to spend their limited cash reserves on financial audits, and so they rush to launch their raises prior to May. The number of raises then drops in May, as many startups no longer have sufficient documentation to raise money.

Here’s why this is actually a good thing for investors:

1. Startup raises historically rebound, so there will be plenty of opportunities in the months following May

2. You now have better data to base your investments off of. It’s pretty crazy to think that we are currently making risky startup investments based off of financial data from 2021…remnants of COVID-lockdowns were still a thing back then, it was an entirely different world. Now we’ll be getting data from 5 months ago.

Fresher data = better informed investment decisions = win for retail investors.

I’ve turned down Rogan. Said no Huberman. Told Harry Stebbings to shove it.

But when Jonny Price asks me to be a guest on his podcast, I drop what I’m doing to get on the mic.

Jonny is one of the head honchos over at Wefunder, and has been a key force in bringing huge names to the equity crowdfunding community. Replit, Mercury Bank, and Substack all ran community rounds - and Jonny’s fingerprints are all over it.

On my episode, we talked about:

• why equity crowdfunding hasn’t grown faster…

• …and why it doesn’t feel like growth has slowed down

• why I didn’t start a bottled horchata business

• a possible Wefunder acquisition?

Give it a listen here, and make sure to leave Jonny a 5-star review.

To negate the coming doom & gloom of May, here are three interesting startups deals that are live now!

1. hobbyDB

• What is it: online database for collectibles that also offers users a way to buy, sell, and track their collections

• Why it’s interesting: collectibles like HotWheels, Funko Pops, and playing cards have grown in popularity and command immense staying power. It’s relatively easy for hobbyDB to add new collections to its database, thus providing it a long runway for growth

2. Perimeter

• What is it: real-time evacuation management software that allows first responders & officials to relay information quickly during an emergency

• Why it’s interesting: it’s no secret that the US has seen an uptick in natural disasters, most notably with forest fires. Perimeter has the potential to advance outdated communication systems… and win high-margin government contracts as a result

3. Atari Game Pool

• What is it: Invest directly into Atari’s latest batch of video games and receive a percentage of royalties from the sales of those games

• Why it’s interesting: Atari is a storied game publisher and still captivates thousands of loyal fans that are excited for game releases. Just make sure you read the terms of the dividend payments so that you understand the agreement of the deal

That’s it for this week! Please consider sharing this newsletter with someone you think would enjoy it - I’m trying to fill in those damn gray states below! :)

Please note that this is not financial advice, nor a recommendation to invest in any of the startups mentioned. Readers should conduct their own due diligence and understand that startup investing is a risky asset class.