Equity Crowdfunding Is Here

Start-ups have an exciting brand new option to raise money!  Regulation Crowdfunding (Reg CF), which went into effect on May 16, 2016, presents to start-ups an unprecedented equity financing opportunity.  For the first time ever, companies can raise capital by selling unregistered securities online to the general public.  Those start-ups that have so far not been able to secure angel investors or venture capital will find Reg CF a more accessible avenue to raise critical start-up capital.  Advantages of raising capital using the Reg CF exemption compared to venture capital financing or an IPO are:

Benefits

  • Start-ups can raise up to $1M using Reg CF in a 12-month period;
  • Reg CF can be used in combination with other types of financing like private placements;
  • Investors can include the general public and are not restricted to accredited investors;
  • Founders typically give up less equity percentage compared to angel and VC funding;
  • Limited initial and ongoing disclosure required compared to a public offering; and
  • Transaction fees are much lower than those of registered offering and the terms are better than VC financing.

Crowdfunding Portal

Start-ups raising money using Reg CF must do so through a FINRA-licensed crowdfunding portal or broker-dealer.  Through a fundraising portal with a broader investor based, start-ups will be able to reach investors beyond their own networks.

Online Marketing

Fundraising success is closely tied to a strategic marketing plan that uses digital experience and big data tools that drives the momentum of the crowdfunding offering. 

CW attorneys, Connie Dai and Julie Kline, are available for any questions.