Crowdfunding now comes in multiple flavors:
- Title II Crowdfunding – Rule 506(c)
- Title III Crowdfunding
- Title IV Crowdfunding – Regulation A+
- Existing Regulation A
- Rule 504 of Regulation
All have one thing in common: the entrepreneur can use “general solicitation and advertising” to raise money.
But that’s all they have in common. They differ on such critical features as:
- Who is allowed to invest
- How much money can be raised
- Whether Internet portals can be used
- How much each investor can invest
- The degree of SEC oversight
- Whether foreign companies can participate
I’ve created a chart to keep it all straight – a Crowdfunding Cheat Sheet. The chart won’t
format properly here in the blog, so you’ll need to click here to view it. You might want to print it for future reference.
This is my takeaway from the chart:
Of the five flavors of Crowdfunding that will soon be available, only Title II Crowdfunding and Regulation A+ Crowdfunding are likely to play a major role. Title III Crowdfunding – ironically, the only thing the media talked about when the JOBS Act was passed in 2012 – seems doomed to a non-speaking part, at least as long as the $1 million limit remains in place. Those satisfied with raising money from only accredited investors will probably look to the simplicity of Title II while those needing to cast a wider net will likely take the plunge into Regulation A+. As for Rule 504 and the old version of Regulation A – they’re history.
But it’s a brand new world in the capital markets, and impossible to predict.
Questions? Contact Mark Roderick.