All crowdfunding is not created equal and if you’re looking for more than just funding a new product launch or a market test via a rewards-based crowdfunding platform like Kickstarter and Indiegogo then regulation crowdfunding may be your best bet.
In 2012, President Obama passed the JOBS Act, a law intended to encourage funding of small businesses in the United States by easing many of the country’s securities regulations. With this act came two new specialty crowdfunding categories, Regulation CF and Regulation A+, both enabling unaccredited investors to invest in interesting companies that are raising funds.
Regulation CF is the smaller of the two, enables eligible companies to offer and sell securities through crowdfunding up to $1 Million on a SEC-registered intermediary, either a broker-dealer or a funding portal like StartEngine or Fundable. Investors can include both accredited and unaccredited investors, allowing companies to raise money from a wider net of potential investors.
Regulation A+ enables eligible companies to offer and sell securities through crowdfunding. With A+ companies can raise money from the entire public: both accredited and non-accredited investors can participate but with A+ you can raise anywhere from $2 Million to $50 from a combination of investor types in two tiers:
Tier 1, for securities offerings of up to $20 million in a 12-month period (both accredited and public)
Tier 2, for securities offerings of up to $50 million in a 12-month period (only accredited investors)
Platforms like StartEndine and Fundable, specialize in this kind of fundraising versus the more “popular” idea of crowdfunding which is rewards-based crowdfunding where you basically pre-pay products in advance of their production to support new ideas. This really expands how companies can obtain funding through various methods.
This is just the tip of the iceberg on Regulation Crowdfunding, which has many other legal needs that need to be covered, but you should be able to get started on choosing the right type of funding strategy for your business. If you have questions about crowdfunding, you can easily email or contact our team at Ronjini at thesilvertelegram dot com.