Read on Twitter
Great news! The SEC is increasing the Regulation Crowdfunding fundraising limits as of March 15, 2021!
This is a GAME CHANGER for the public to invest in the companies innovating in the private markets - which usually drive the largest returns.
Iâll break it down below!
This is a GAME CHANGER for the public to invest in the companies innovating in the private markets - which usually drive the largest returns.
Iâll break it down below!
In traditional private markets back in the day, companies had to be very private when raising money.
No advertising, no public announcements, no social media hype.
This shrunk the pool of investors any one business could target, and wasnât fair for the average investor.
No advertising, no public announcements, no social media hype.
This shrunk the pool of investors any one business could target, and wasnât fair for the average investor.
So, to help remedy that, the Obama-administration passed the Jumpstart Our Business Startups Act, or the JOBS Act, back in 2012.
This Act featured many different âexemptions,â but the general theme of the rule changes removed restrictions around advertising a deal to the public.
This Act featured many different âexemptions,â but the general theme of the rule changes removed restrictions around advertising a deal to the public.
Regulation Crowdfunding, one of the four exemptions codified in the JOBS Act, allowed for any US investor to invest, regardless of wealth or status.
Think of it like a Kickstarter campaign, except instead of preordering a product, youâre buying shares in the company.
Think of it like a Kickstarter campaign, except instead of preordering a product, youâre buying shares in the company.
This exemption has been wildly successful, allowing small business to build marketing campaigns and raise money from their community and customers, without pressure or hassle from investment bankers or venture capital firms.
The average person was granted unprecedented access.
The average person was granted unprecedented access.
According to this @crowdfundinside article from May, this exemption has led to over $350M in funding for businesses: https://www.crowdfundinsider.com/2020/05/161783-on-anniversary-of-reg-cf-there-are-now-51-active-funding-portals-almost-1500-companies-have-raised-367-million/
However, Reg CF had one significant bottleneck that prevented full mainstream adoption: companies were only allowed to raise up to $1.07 million per year.
While thatâs a great start, the reality is that $1M is not enough money to help SMEs take it to the next level.
While thatâs a great start, the reality is that $1M is not enough money to help SMEs take it to the next level.
The limit allowed for startups and small businesses to raise the seed capital needed to get their businesses off the ground, but many felt that the limit was too low to be fully taken advantage of by family businesses to grow past the initial launch of the company.
Fast forward to November, when after a comment period by the general public, the SEC decided to increase this fundraising cap to $5,000,000 per year!
This is a significant change that exponentially increases the opportunity for businesses nationwide.
This is a significant change that exponentially increases the opportunity for businesses nationwide.
It will allow many more business, of all sizes, to connect with potential customers and enthusiasts, providing those people with an opportunity to invest in their favorite niche brands, well before theyâd get the opportunity to on the stock market.
This change was announced in 2020, but will officially go into effect on March 15, 2021.
I think we can expect to crush that $367M figure over the coming year.
I think we can expect to crush that $367M figure over the coming year.
To conduct a Reg CF offering, a firm has to work with a registered crowdfunding portal. These portals have diligence requirements to verify each company listing on each respective platform.
For investors, itâs also a convenient place to aggregate different deals and industries!
For investors, itâs also a convenient place to aggregate different deals and industries!
There are many different equity crowdfunding portals, including @joinrepublic, @SeedInvest @Wefunder and many, many more.
Go check them out if you want to learn more!
Go check them out if you want to learn more!
Hopefully this was helpful in understanding Regulation CF and the recent changes! If you enjoyed, a like and retweet is appreciated!
Also, let me know what topic youâd like to read about next!
H/t to @SahilBloom for the inspiration on breakdown threads
Also, let me know what topic youâd like to read about next!
H/t to @SahilBloom for the inspiration on breakdown threads
