Effectively Marketing Reg CF, Part 6: Compliance-Safe Marketing And How to Build Excitement Without Getting a Call You Don’t Want To Get

By the time you reach this point in the crowdfunding process, you usually have one question lingering in the back of your mind. You’ve taken the steps I outlined in Parts 1-5 of this series (links at end of the article). You’ve built the waitlist, you’ve warmed up their network, you’ve planned launch week momentum, and you’re finally starting to feel like the offering might actually work. Then reality arrives in the form of a slightly nervous thought: “What am I actually allowed to say?”

It’s a fair question, and it’s one that every founder should take seriously. Regulation Crowdfunding is all about marketing, but it’s also a securities offering. That means it comes with rules, boundaries, and compliance professionals whose job is essentially to keep you from accidentally turning your company into a cautionary tale. Founders sometimes assume the rules mean they can’t talk at all, while others assume the rules don’t apply because they are “just posting updates.” The truth is in the middle: you absolutely can market your offering, but you need to do it with discipline. And, you have to follow some rules which sometimes don’t make a lot of sense.

Don’t blame me. I didn’t write the rules. I just have to make sure my clients don’t break them, no matter how much I personally disagree with some of them.

While Reg CF has some specific marketing rules I'll discuss later in this article, overall a good starting part for compliance-safe marketing of any securities offering is to remember one core principle: you can be enthusiastic, but you can’t be misleading. Securities laws aren’t designed to prevent founders from telling their story. They are designed to prevent investors from being sold a fantasy. If your marketing is grounded in truth, avoids exaggeration, and directs people to the proper offering materials, you’re usually on solid ground.

One of the most common mistakes founders make is slipping into language that sounds like a guarantee. This almost never happens because founders are trying to deceive anyone. It happens because they are excited, they believe deeply in the company, and they want supporters to feel that excitement too. So they start using phrases like “This is a no-brainer,” or “You can’t lose,” or “Invest now and you’ll thank yourself later.” In everyday conversation, those are harmless. In a securities offering context, they are highly problematic.

 Equity crowdfunding investments are risky by nature (as are all investments) and investors must understand that. No founder can promise returns, and no founder can promise success. Your marketing should focus on what you’re building, not on what investors will make. You’re allowed to explain the business, the mission, the traction, and why you believe the company has potential. You’re not allowed to suggest that an investor’s profit is inevitable. The more your marketing sounds like a guarantee, the more trouble you invite

Closely related to this is the issue of performance claims. Founders love momentum, and they love telling the world that the company is about to explode. But securities regulators and portal compliance teams become very uncomfortable when marketing starts to resemble “get rich” language. Statements implying huge returns, inevitable appreciation, or once-in-a-lifetime opportunity often trigger immediate red flags. Investors can smell hype, and regulators can smell it too. In fact, even if you don’t cross the line into hype, regulators like balance. If you say something positive may happen, they like to see an equal mention by you that something negative may happen. Nobody wants to post on social media something that looks like this: “In one week you can invest in the next big thing! But, if you do, there is a great chance we will fail and you will lose all your money!”

Founders often try to minimize or brush aside risk in their securities marketing. Founders naturally want supporters to feel comfortable, so they sometimes casually reassure people that things are safe or certain. But in Reg CF, the honest approach is always better. A mature founder acknowledges risk while still expressing conviction: “This is an early-stage investment, it involves risk, but we believe strongly in what we are building.” That tone builds far more trust than pretending risk doesn’t exist.

A practical rule of thumb is that your communications should emphasize the company rather than the investor outcome. Avoid hype. Avoid promises. Avoid future predictions. Talk about your mission, your team, your products or services, your customers, and your progress. Avoid framing the offering as a shortcut to profit. When founders communicate with grounded confidence instead of exaggerated certainty, they not only stay safer legally, they often attract better investors.

Founders also need to understand that the compliance environment changes slightly once the Form C is filed and the offering is live. Before filing, you can certainly build awareness, grow a waitlist, and talk about the company’s plans, but you generally want to avoid anything that looks like soliciting actual investments before the offering exists. The pre-launch phase is about education and anticipation, not collecting checks. This period is called “testing the waters” and you need to always include a testing the waters disclaimer with all communications and keep copies of all such marketing to file with the SEC when you file your Form C to launch.

Once the offering is live, communications can be more direct, because now there is a compliant portal page where investments occur and disclosures are available. This is why intermediaries often require that offering-related marketing direct investors back to the offering page hosted by a funding portal or broker-dealer. In a securities offering, you don’t want marketing to become the primary source of information. The offering page is where the official disclosures live, and the offering page is where investments will be made. If you keep your marketing focused on pointing people to the offering page rather than making sweeping claims in social media captions, you will generally reduce compliance friction.

And keep in mind this very important Reg CF specific rule: once you launch you cannot talk about the “terms of the offering” in your marketing. Those can only be shown to investors once they get to your offering page online unless you run a “tombstone” ad. A tombstone ad has nothing to do with Wyatt Earp and Doc Holiday, it’s a very simple and boring ad that directs investors to the offering page online and includes nothing other than a statement that the issuer is conducting a Reg CF offering, the name of the platform hosting the offering and a link to the platform, the terms of your offering, and factual information about your limited to your company name, address, phone number and website, email address and a brief description of your business. In other words, the most boring ad you can imagine.

So what are the terms of the offering that you cannot place in your Reg CF marketing, you ask? Luckily, Congress set these out for us in instructions to the actual Reg CF statute. Terms of the offering are:

1. The amount of securities offered,

2. The nature of the securities,

3. The price of the securities,

4. The closing date of the offering period,

5. The planned use of proceeds, and

6. The progress toward meeting your funding target.

And don’t forget, this prohibition against using the “terms of the offering” in your Reg CF marketing applies not just to what you say, but what others say about your company if you amplify it. While you certainly can’t control what some third party writes about your company online in most cases, if you take something someone wrote or said that contains terms of the offering and you repost it on your company's social media or website, you just violated the law. That awesome local newspaper article or television story about your company that also mentions that your stock is only $5 per share and that your company is raising $1,000,000 is not something you are expected to control. But take it and post in on all your company’s social media, and the words in that article of story suddenly become yours, terms of the offering and all.

Testimonials are another place where founders need to be thoughtful. Sharing customer enthusiasm is excellent, but you must be careful when testimonials drift into investment promotion. A customer saying, “This product is amazing,” is very different from someone saying, “Invest now, this stock is going to the moon.” The first supports the business. The second starts to sound like an investment pitch. Keeping testimonials focused on product and mission, not future returns, is the safer path.

It’s also wise to remember that anyone speaking publicly about your offering can create issues, even if they mean well. Employees, ambassadors, or enthusiastic supporters may not understand the boundaries and may accidentally overpromise or exaggerate. This is why providing simple suggested language to your team and “investor champions” is so helpful. People want to help you share the campaign, but you want them sharing it in ways that are factual and compliant. Ultimately, compliance-safe marketing is not about being boring. It’s about being credible. The best equity crowdfunding offerings don’t win because they shout the loudest. They win because they communicate clearly, honestly, and consistently. Investors respond to founders who treat this like a serious business, not like a hype festival. Regulators and portals/broker-dealers respond well to that too.

The bottom line is that you can absolutely build excitement around a Reg CF offering. You just need to build it on truth rather than promises, on mission rather than guarantees, and on credibility rather than exaggeration. If you approach compliance as a foundation instead of a restriction, you will market better, raise better, and sleep better.

With that, the full pre-launch blueprint is complete. Build the crowd before launch, start with warm momentum, capture interest through infrastructure, earn trust through content, orchestrate opening-week traction, and market with excitement that stays inside the rules. When founders do those things, a Reg CF offering feels like an event people were waiting for, not a link dropped into silence.

To read Part 1 of the 6 part series, click here.

To read Part 2 of the 6 part series, click here

To read Part 3 of the 6 part series, click here.

To read Part 4 of the 6 part series, click here.

To read Part 5 of the 6 part series, click here.

This article is not and should not be considered legal advice. Yes, I am a securities lawyer but no, you did not hire me to provide you with legal advice. In all cases, consult with your own lawyer as every legal situation is unique and do not rely on my educational and informative article as legal advice.

Effectively Marketing Reg CF, Part 4: Content Builds Trust. How to Make Investors Feel Like They Already Know You Before You Launch

By the time most founders start thinking seriously about marketing their Regulation Crowdfunding campaign, they are usually already behind. You learned that in Parts 1 through 3 (LINK) of this series. Not because the paperwork is incomplete or the online offering page isn’t polished, but because they are still treating the offering like a transaction instead of what it really is: a trust exercise.

 Investors don’t wake up one morning eager to invest in a company they have never heard of, led by a founder they don’t know, in an industry they haven’t thought about since high school economics class. Trust has to exist before investment happens, and content is one of the best ways to build that trust.

The central idea is simple: investors invest in what feels familiar. Most people don’t invest the first time they hear about you, no matter how good your pitch is. They invest after they have seen you repeatedly, watched your progress, and started to feel like they understand who you are and what you are building. In other words, crowdfunding works a lot more like a relationship than a vending machine.

 You don’t press “Launch” and have money fall out. You introduce yourself, show up consistently, and earn confidence over time.

This is why pre-launch content is so important. Content is not about hype or trying to “go viral,” and it’s certainly not about shouting “INVEST NOW” into the social media void. It’s about letting people get to know you before you ever ask them to invest. Think of it as inviting supporters behind the scenes while the company is still being built, rather than showing up on launch day and saying, “Hello stranger, would you like to become a shareholder?”

 Founders often assume content needs to be expensive or perfectly produced. They imagine professional video crews, scripted commercials, and glossy brand campaigns with cinematic music. In reality, some of the most effective crowdfunding content is embarrassingly simple. A founder talking into an iPhone camera for sixty seconds can outperform a polished corporate promo because investors aren’t looking for Hollywood - they are looking for authenticity. People love to see a real founder building a real business, not a marketing robot reading bullet points off a teleprompter.

 That’s not to say that you should ignore the quality of your video or any part of your marketing outreach. If you’re shooting a video on your cell phone, make sure the lighting looks good and your audio quality is excellent. Nothing kills a potential investor’s confidence in you than to put out a video that looks like you don’t care about appearance or where you sound like you are in a tin can.  If you don’t care how you look and sound, what confidence are you building in your potential investor audience? They may think: Is this how they will market their products also? Low quality visuals and horrible sound? If so, they will run away and never come back.

 So what should you actually post? The most effective pre-launch content usually falls into a few categories, and none of them require complicated production. Founder story content is powerful because people invest in conviction, not just products. Progress content is equally important because movement creates confidence, and investors want to feel that the company is alive and advancing. Customer love, testimonials, and real-world validation are also extremely persuasive because social proof builds social proof.

 Mission content matters as well, especially in Reg CF where many investors are emotionally motivated supporters rather than purely financial analysts. People like investing in something meaningful, something they can talk about at dinner, something that feels bigger than “we would like more capital.” And finally, the most overlooked category is human content: showing personality, humor, setbacks, and real founder moments. Investors trust founders who sound like humans, not founders who sound like press releases.

 Consistency matters more than brilliance. You don’t need to post ten times a day like an influencer trying to sell protein powder. But you do need to show up often enough that people remember you exist. For many campaigns, two or three thoughtful posts per week in the month or two leading up to launch is plenty. The goal is not volume for the sake of volume, the goal is familiarity through repetition.

 One of the biggest mistakes founders make is producing content without a next step. A post that gets attention is nice, but attention that disappears is wasted. Every piece of pre-launch content should gently funnel interested people toward the waitlist or early access list. The post doesn’t need to be aggressive, but it should invite action: “If you want to be notified when we launch, join the early investor list.” That simple line is how content becomes pipeline.

 Founders also worry about what they are allowed to say, and that concern is legitimate. Securities offerings come with boundaries, and I will address compliance directly in Part 6. But the safest pre-launch content is almost always the most effective content anyway: storytelling, education, mission, traction, and honest progress updates. Avoid exaggerated promises, avoid “get rich” language, and focus instead on building belief in the business. Excitement is fine, exaggeration is not.

 The deeper truth is that equity crowdfunding investors don’t invest because your Form C is beautifully drafted. They invest because they feel connected. They invest because they have watched you build, and they want to be part of what comes next. Content is how you create that connection at scale, long before launch day.

The bottom line is that Regulation Crowdfunding is not just about filing and going live. It’s about building an audience that trusts you enough to invest, and that trust is built through familiarity over time. If you let people meet you now - through consistent, authentic content - then when launch day arrives, investing will feel like a natural next step rather than a cold ask.

 Coming next in Part 5: Launch week strategy, opening weekend momentum, investor champions, events, and how to convert a warm crowd into Day One traction.

To read Part 1 of the six part series, click here.

To read Part 2 of the six part series, click here.

To read Part 3 of the six part series, click here..

This article is not and should not be considered legal advice. Yes, I am a securities lawyer but no, you did not hire me to provide you with legal advice. In all cases, consult with your own lawyer as every legal situation is unique and do not rely on my educational and informative article as legal advice.

Effectively Marketing Reg CF, Part 3: Build the Machine: Waitlists, Landing Pages, and Email Sequences That Turn Interest Into Investors

By now, the pattern should be clear: successful Regulation Crowdfunding campaigns don’t begin on launch day. They begin weeks earlier, when the founder is quietly building momentum behind the scenes. In Part 1, (link at end of article) we talked about the central truth that the crowd doesn’t magically appear first. In Part 2, (link also at end of article) we covered where early momentum actually comes from, which is almost always warm contacts and real human outreach. Now, in Part 3, we turn to the part founders consistently underestimate: building the infrastructure that captures attention and converts it into investment.

Even if you have a great product, a great story, and a supportive network, none of that matters if interested people simply slip away. Equity crowdfunding is not only about creating excitement, it’s about channeling excitement somewhere useful.

“The internet is full of people who are curious for thirty seconds and then gone forever. Your job before launch is to make sure curiosity turns into a relationship, and a relationship turns into action.”

That is why one of the most valuable assets in any Reg CF raise is an email list. Social media is helpful, but it’s also unreliable, because algorithms change and attention is fleeting. Plus, only a small part of your social media audience is fed each post, and then a smaller percentage sees it on their timeline. Email is different because it creates a direct connection that you control. When someone gives you their email address, they are raising their hand in a small but meaningful way. You want to catch that hand and keep the conversation going.

The simplest and most effective way to do that is with a pre-launch landing page. This doesn’t need to be a complicated website or a cinematic masterpiece. It needs to do one job: invite interested supporters to join an early investor list. A clear headline, a short description of the mission, and one call-to-action is enough. Think of it as building the guest list before the party, not trying to serve dinner before anyone arrives. And make sure to follow testing the waters rules.

A real waitlist is different from followers or likes because it reflects intent rather than casual interest. Someone who joins a waitlist is saying, “Keep me in the loop, I care enough to hear more.” Once founders build a waitlist, many assume the work is done until launch day. They think they can simply email everyone when the offering opens and investors will rush in. In reality, people need warming up, familiarity, and repetition before they invest. Launch day should not feel like a surprise announcement. It should feel like the natural next chapter in a story that supporters have been following.

This is where the pre-launch email sequence becomes one of the most powerful tools in crowdfunding. A strong campaign is rarely driven by one email blast, it’s driven by a thoughtful progression of communication over several weeks. Your early emails should tell the founder story and the mission, not scream “invest now.” As launch approaches, you begin sharing traction, progress, and what the round will support. By the time the offering opens, your audience should already feel like insiders.

Founders sometimes worry that sending multiple emails is annoying, but the opposite is usually true when the emails are valuable. Investors rarely invest the first time they hear about an opportunity. They invest after trust accumulates through repeated exposure and consistent communication. This is especially true in Reg CF, where many investors are everyday supporters rather than professional venture funds. They want to feel comfortable, informed, and connected before they act.

What about losing people off your email list? Will it happen? Probably. But as I always point out, why do you want people on your email list who unsubscribe when they hear something positive about your company? Do you really want people on your email list who have no interest in hearing about an opportunity to be an early supporter of your company? Are these really people who are going to otherwise support your company and buy your products? In some cases — yes. In most cases, they were just part of a number so you can brag about the size of your email list, but not someone who likely is going to buy your products or services long term. Someone who invests, on the other hand, is not only likely to purchase what you sell, but also likely to tell others they know about your company and your products.

I’ll take the people I can add to my mailing list from that investor category every day over someone who doesn’t even want to hear about an opportunity to support your amazing business.

Every piece of content you create during pre-launch should funnel back into this machine. Social posts, founder videos, podcasts, events, and outreach should all drive people toward the waitlist. Attention without capture is wasted, like pouring water into a bucket with holes. The purpose of the pre-launch machine is to hold that attention so it can be converted later.

When launch day finally arrives, this infrastructure becomes the difference between silence and momentum. Instead of launching into an empty room, you launch into an audience that has been waiting, reading, and following along. People invest early because it feels like the next step, not a cold ask. That early traction then creates the social proof that brings the broader crowd in afterward.

The bottom line is that Reg CF is not only about filing a form with the SEC and going live. It’s about building a conversion path before you ever open the doors. Warm outreach provides the spark, the waitlist captures interest, and email nurtures trust over time. Together, they create the machine that makes launch week work.

Coming next in Part 4: How to use content and storytelling to make investors feel like they already know you before you ever ask them to invest.

To read Part 1 of the six part series, click here.

To read Part 2 of the six part series, click here.

This article is not and should not be considered legal advice. Yes, I am a securities lawyer but no, you did not hire me to provide you with legal advice. In all cases, consult with your own lawyer as every legal situation is unique and do not rely on my educational and informative article as legal advice.

Effectively Marketing Reg CF, Part 1: The Truth Is The Crowd Doesn’t Show Up First

For part one of this six part series on marketing Reg CF offerings, let me start with an uncomfortable truth, because Regulation Crowdfunding is full of them.

 A Reg CF offering is not like putting a product on a shelf and waiting for customers to wander in. It’s not like opening a lemonade stand in the middle of the summer and watching the neighborhood form a line because, naturally, everyone has been thinking about lemonade all week. And it’s definitely not like posting “WE’RE LIVE!!!” on LinkedIn and having thousands of investors appear out of thin air, credit cards in hand, ready to fund your dreams.

 If only.

 Crowdfunding doesn’t work that way. Not in real life. Not in the real securities world. Not in the world where investors are cautious, distracted, and have approximately 400 other things competing for their attention, including their jobs, their families, and whatever Netflix just released last night. The biggest mistake founders make in Reg CF is thinking that the crowd shows up first. They don’t. The crowd shows up later, and only if they see something worth joining.

 A Reg CF raise is much closer to throwing a party than flipping a light switch. If you don’t invite anyone ahead of time, you’re not “launching a party.” You’re simply standing alone in your living room with a bowl of chips, checking your phone, wondering why nobody came. The chips are stale. The music is playing for no one. The vibe is… bleak.

 That, in crowdfunding terms, is what a cold launch looks like.

 Founders often imagine the process like this: you file your Form C, your offering is posted online and then the internet does its magical internet thing. Investors appear. Momentum builds. The raise closes. Champagne pops. Everyone hugs. A documentary crew follows you around for Season Two.

 In reality, the first few days of a Reg CF campaign often look more like this: your mom invests $500, your college roommate throws in $250, your CFO refreshes the portal page seventy-three times, and someone asks the question no one wants to hear out loud: “So… is this working?”

 Crowdfunding is not a magic money machine. It’s a momentum machine, but only if you build the engine before you hit the ignition.

 One of the defining features of Reg CF is that your progress is public. Unlike a quiet private raise, where commitments happen behind closed doors, crowdfunding is a scoreboard. If you are on a funding portal, anyone who lands on your campaign page can see how much you have raised, how many investors have participated, and whether the whole thing feels alive or abandoned.

 Humans, as it turns out, aren’t perfectly rational creatures. Investors don’t want to be the first penguin jumping into the ocean to see if there are sharks. They want to jump in after forty-seven other penguins have already gone in safely.

 So if your campaign is sitting at $8,200 after two weeks, with fourteen investors and an update that says, “We are excited to announce that we are excited,” that doesn’t inspire confidence. It doesn’t necessarily mean the company is bad. But crowdfunding is perception-driven, and the perception becomes: “If no one else is investing, what do they know that I don’t?”

 That’s why early momentum is everything.

 If Reg CF were a movie, your first week is opening weekend. And opening weekend determines whether your project becomes a blockbuster or quietly disappears into the streaming abyss, destined to be rediscovered years later in a documentary called Startup Dreams: The Reg CF Offering That Never Took Off.

 Successful campaigns almost always raise a meaningful amount early. A common benchmark is reaching twenty to thirty percent of your target within the first seven to ten days. Not two percent. Not “we’re building awareness.” Not “ads start next month.” Real traction. Momentum attracts momentum. That is the whole game.

 Think of crowdfunding like a bonfire. The crowd doesn’t show up with firewood and matches. The crowd shows up when they see flames. Your job before launch is to build the fire: early believers, warm contacts, committed supporters, a real sense that something is happening. The crowd is gasoline, not the spark.

 Here’s another analogy that founders understand immediately. Imagine you’re walking down the street trying to decide where to eat dinner. You see two restaurants. One is packed, buzzing, full of laughter, plates clinking, people clearly having a good time. The other is completely empty except for one lonely waiter staring into the void like a character in a French art film.

 Where do you go?

 Exactly.

 Even if the empty restaurant has better food, your brain screams, “Something must be wrong here.” Crowdfunding works the same way. Investors don’t want to be first. They want to join something already moving.

 And here’s the deeper truth: Reg CF is not just capital raising. It’s trust raising. Investors don’t invest because they memorized your valuation. They invest because they believe you’re credible, the business is real, the founders can execute, and other people believe too. A crowdfunding raise is a trust campaign disguised as a securities offering. That trust doesn’t begin on launch day.

 So what does it actually mean to “build the crowd” before you launch? It means you don’t treat launch day as the starting line. Launch day is the performance. Pre-launch is rehearsal, ticket sales, and filling the seats. Before you ever go live, you should already have a warm audience ready. You should have investors who have said, “Send me the link when it opens.” You should have an email list that isn’t just your own staff. You should have content circulating, conversations happening, anticipation building, all while following testing the waters rules and archiving your crowd building efforts.

 A practical benchmark that many strong campaigns follow is having at least $100,000 of likely investment commitments lined up before Day One. That doesn’t mean money wired into escrow. It means real human beings - names, faces, actual conversations - who have expressed genuine interest and intent. Because if you launch tomorrow, the question is not “Will the crowd invest?” The question is: who invests in the first seventy-two hours? If you cannot answer that with actual people, you’re launching into the void. And the void is not known for writing checks.

 Founders sometimes say, “We’ll market after we launch.” That is like saying, “We’ll invite people to the party after it starts.” Marketing happens before. Awareness happens before. Familiarity happens before. Launch is where you convert what you’ve already built. And the founder’s role in all of this is unavoidable. Crowdfunding is not passive. It’s not something you outsource entirely to a portal. The founder becomes the chief storyteller, the chief trust-builder, and frankly, the chief person-who-has-to-text-two-hundred-people. The founders who embrace that reality succeed. The ones who expect strangers to do the heavy lifting on Day One usually don’t.

 So here is the bottom line, stated plainly: a Reg CF offering is not a vending machine where you press “Launch” and money falls out. It’s a campaign built on momentum and trust. The crowd doesn’t arrive first. The crowd arrives when you have already built something worth joining.

Before you file. Before you launch. Before you start spending real money on marketing, ask yourself one simple question: Who is already standing outside the theater waiting for the doors to open?

 Because if nobody is outside, opening night is going to be very, very quiet.

 Coming next in Part 2: How to raise your first $100,000 from friends, family, and warm contacts - without feeling like you’re pitching a timeshare at Thanksgiving dinner.

This article is not and should not be considered legal advice. Yes, I am a securities lawyer but no, you did not hire me to provide you with legal advice. In all cases, consult with your own lawyer as every legal situation is unique and do not rely on my educational and informative article as legal advice.

How To Make An Effective Equity Crowdfunding Video

Take an AI generated movie set background, sprinkle in some bad photoshop of my head, and Voila! I’m a film director!

Why is a securities lawyer talking about making videos? Those who know me understand, but for those who are new to the world of Kendall Almerico, let me give you a tiny bit of background.

I’m been shooting and editing film (and later video) since I was a teenager. Not to date myself, but that means I was making Super 8 movies and cutting them with a razor and using tape to hold clips together. I remember when video cameras first came out and there was no way to edit them at home, so anything you shot had to be shot in order — no mulligans — to make a cohesive movie.

Go ahead, make dinosaur jokes.

I later worked in television and radio stations and I have an undergraduate degree in broadcasting. You used to have to pretty much work in broadcast related business to have access to video editing equipment. Now, anybody and everybody can shoot and edit quality video with the tiny device we all keep in our pockets (or our hands)  — but that doesn’t mean everyone can make a great video that tells a story and sells a product or company. That takes not just technical knowhow, but a certain set of skills that involves knowing how to communicate to the masses in a persuasive manner.

I’m not a professional videographer, but I know how to tell a story. I know how to communicate with investors through video. And I’m smart enough to know that a style of video that works for one company, does not necessarily work for every company.

There are some common elements in most successful equity crowdfunding videos, and this article will talk about those elements, and give you some real world examples of videos that I have used personally with clients to successfully to raise significant capital in the equity crowdfunding space.

Get Attention Quickly

You only have a few seconds to grab a viewer’s attention and to keep it. Many experts (people who write things on the internet are always “experts” so you know they’re telling the truth!) say that if you don’t grab a viewer’s attention in the first 10 seconds of an online video, you will lose that viewer. It’s true. People have short attention spans — especially when watching video online. So you need to grab people’s attention right away. I’m not sure 10 seconds is really a make or break point, but you definitely need to do something at the beginning of the video to keep people engaged.

If they stop watching your video after 10 seconds, there is a very strong chance they are not going to invest in your company. So don’t start off your video with something boring. Things like a great visual, an exciting phrase or a famous face will hold attention. Do what works for your company, but do it right away at the beginning of your video.

And I know all of this because I’m an expert!

Here is an example from my client, international craft brewing sensation BrewDog. More about them later (and the full video this screenshot came from), but when they launched their first successful Reg A offering a few years ago, the first thing you saw on their equity crowdfunding video was this:

You may not have known that BrewDog called their equity crowdfunding offerings “Equity for Punks.” You may know anything about them. But you see a vibrant Times Square backdrop and some attention grabbing words: Propaganda Outreach. If you stopped watching after seeing this, you were never the kind of person who was going to invest in their company anyway.

Don’t Go Too Long

A lot of “experts” will tell you that your video should be under 2 minutes. Some will tell you under 90 seconds. While this would be ideal given the short attention spans of your typical TicTok viewer, it’s not really accurate when it comes to equity crowdfunding videos. The reality is, most companies will not be able to effectively introduce their company, explain an investment opportunity and convince strangers to invest in 90 seconds. The random time limitations people impose also contradict the reality that if you make a 60 minute compelling and interesting video, people will watch it for 60 minutes. Hell, every major motion picture made is 90 minutes minimum, and a great film leaves you on the edge of your seat not leaving, but instead wanting more.

This goes back to my story telling comment earlier in the article. If you can tell the complete story in 90 seconds, you should do so. But if it takes 3–5 minutes to do so, and you can do it in a very interesting and compelling way, 3–5 minutes is also okay. It all depends on what you are saying, who is saying it, how it is being said, and if you have a creative team who knows how to keep the subject matter interesting.

I’m going to use three examples of videos made by equity crowdfunding clients of mine to launch their online offerings – one of which is still ongoing as this is published. All three were very successful, and collectively these three offerings raised millions of dollars from thousands of investors. The lengths of the three videos are 2:07, 2:38 and 5:15! When you see each of these videos below, I doubt you will be looking at your watch and wondering why they are longer than 90 seconds. They are compelling, attention grabbing and interesting. But if you are going to use a 5 minute video, you better make sure it’s not boring or repetitive. Show it to a few people when it’s done but before you launch it. If you hear “That was too long” and — believe me, people will tell you if it’s too long — then edit it down and make it tighter.

Get People Excited About Your Company As Quickly As Possible

Remember, you are not making The Godfather or Citizen Kane.

You’re making a commercial for your company. You’re not trying to sell tickets to a movie theatre. You’re trying to sell investments in your company. This is not time for Quentin Tarantino film techniques with a timeline where you have to watch half a movie that seems chronologically challenged then it all ties together at the end (with lots of blood and cursing). You’re making an ad. It needs to grab people quickly. I needs to get people excited about your company quickly. It needs to get people thinking “I’ll watch the rest of this, I’m interested in investing in this company!”

So don’t wait until 30 seconds into a 2 minute video to explain what your company does. Tell the viewer right away. Let them know why your company is special — right away. Use visuals — this is video after all — do not have a talking head spending 30 seconds explaining something that one picture or 5 seconds of video can explain immediately!

Real People Get Real Results

Not every great equity crowdfunding video has someone central to the company in it. But most do. And there is a reason why.

Lots of people bet on the jockey, not on the horse.

Most companies using equity crowdfunding, whether it is Reg A or Reg CF, are at a relatively early stage. Apple is not using equity crowdfunding. Apple can do a video, use its famous logo, throw up great imagery and sounds — and sell you its products — because its Apple! You already know who they are and what they do.

Most companies using equity crowdfunding are not particularly well-known. You have to explain to people what you do, and who you are. And having a face that is integral to the company to do the explaining is usually the right call. Look, I’ll be the first to admit if the founders of a company do not look good or do not sound great on video, this concept gets thrown out the window. But most founders believe in their company, know more about the company than anyone else, and speak with passion about their company and that belief, knowledge and passion come through in a well-made video.

Here’s an example from a Reg A video for my client Armed Forces Brewing Company who sold out their first Reg A offering. They are now on their second Reg A offering which you can read about here: www.OwnArmedForcesBrewingCo.com Their entire launch video is below, but this is the first frame of the video from their initial Reg A offering:

That guy is Robert J. O’Neill, a highly decorated retired Navy SEAL who also just happens to be the guy who shot and killed Osama Bin Laden. He is one of many veterans who own this military tribute brewery. While many people recognize him, not everyone does, so the first words out of his mouth are “I’m Robert J. O’Neill, former Navy SEAL Team 6 operator, and I shot a famous guy.” Even if you didn’t hear the audio, you have seen (a) the company’s logo and branding, (b) American flags and (c) guns and ammo. If this kind of imagery is not appealing to a viewer, that viewer is not likely to invest in Armed Forces Brewing Company. But for people who are fans of the U.S. military and veterans, this opening shot and tiny bit of dialogue have sucked you in and kept you watching. This is what the beginning of an effective video needs to do.

Remember the graphic that started the BrewDog video I showed you earlier — the one that said Equity For Punks: Propaganda Outreach? Right after that graphic, the video cuts to BrewDog’s founders. 

They are shot from a very low angle and they have NYC lights behind them. It’s visually strange, but grabs your attention. And it fits their company. Here are your founders — this is who we are! And when you see the full video a little further down in this article, you will hear the passion in their voices as they tell you how excited they are to bring their global success to America!

Problem and Solution

There is a widely held belief that every pitch deck, every video and every other thing done to attract investors must identify a problem, then explain why this company has the magical solution!

I’m not one to argue with things that work, and I agree that this makes sense in many cases — particularly when you have a new product or service that people may not understand. If you have to explain that a problem exists because people do not inherently know about it, then a “problem and solution” section of your video is probably a good idea. In fact, you may want to lead with it.

But if your company is entering a flourishing and crowded market that already exists, forcing a “problem and solution” into a video may just be a waste of time. Leave it in your deck or on your offering page. For example, my client BrewDog is a craft brewery behemoth that is a true unicorn — with an enterprise valuation of more than $1B. They have successfully run many equity crowdfunding offerings around the world, and have raised hundreds of millions of dollars from hundreds of thousands of crowdfunding investors worldwide. When they used Reg A to fund their first U.S. brewery, they were already a successful and profitable brand all over Europe, but had almost no footprint or visibility in America. They simply believed that they had a better product, a better approach and better everything than craft brewers in America.

There wasn’t a “problem” with the craft brewing industry in the U.S. they were trying to take their share of. They didn’t offer a “solution” to a problem. They just needed to educate people about who they were, what they bring to the table and their overseas success. So their crowdfunding launch video (click on the photo below to watch the video) did not have (or need) a “problem and solution” section.

This video launched one of the first Reg A offerings in the U.S. and drove thousands of people who had never heard of BrewDog to invest millions in the company to launch their U.S. operations. One of the reasons I love this video so much is that it really sends a message about what BrewDog is all about. You see the two founders and you know their personalities right away (bet on the jockey not the horse). It is high energy and you hear about their success overseas (get people excited as soon as possible). It is professional looking and has great video and sound (see below for good video and sound). It asks for an investment (see below for don’t forget the ask). You see that they like to “stick it to the man” by dropping “fat cats” all over Wall Street. While this approach may not appeal to everyone, and probably not to many traditional stock market investors at the time, it was an incredibly effective video to introduce a company to a new market for that company, and it worked.

What I like about it most is that I made an Alfred Hitchcockian cameo in the video. Yes, that’s me — the extremely handsome movie star everyone is staring at before he is unceremoniously smacked down by a parachuting fat cat. If there were credits in the video, I would have been listed as “Dude in suit on Wall Street pummeled by falling feline.”

Talk About Your Business — But Don’t Make It All About Numbers

In the world of public companies traded on NASDAQ or the NYSE, it’s all about the numbers. Revenues, profitability, PE ratios and a million other stats that analysts spew out to analyze how a company is performing. Public company management often spend more time worrying about their stock price than anything else. Numbers are important. But don’t make the mistake of thinking that most Reg A or Reg CF offerings should be treated anything like public companies when it comes to talking about business numbers in an equity crowdfunding video.

Hit a few main numbers and statistics in your video, but if you include more than 2–3, you are going to lose your audience. Watching a crowdfunding video is nothing like watching a stock market analyst talking about a publicly traded company on CNBC. If your video drones on and on about numbers and stats, I can assure you many people will stop paying attention. It’s hard to entertain and keep people engaged when you are droning on and on about one number after another.

If you are going to use numbers and stats, consider adding graphics to illustrate. There is a reason people say a picture is worth a thousand words. People will remember a graphic with a number at a far greater percentage that a number than is merely spoken. For example, take a look at this video from another client of mine that recently completed a successful Reg CF offering, Wunderground Coffee.

Look at how Wunderground’s Reg CF video illustrated a key number/stat to show their growth.

This is one of my favorite crowdfunding videos because (a) it worked (b) it told a lot of important stories about the company in a short time (c) it showed off the amaxing founder Jody Hall and her team of very successful entrepreneurs with multiple exits and a history with an industry giant (d) explained why mushroom coffee is delicious and healthy and a new growing industry and (e) had lots and lots of “food porn” shots of their amazing coffee.

Don’t Forget “The Ask”

Crowdfunding Video 101 — Ask your viewers to invest. Ask more than once if you want. Definitely ask at the very end — in the perfect world a viewer of the video watches the video then goes straight to the INVEST button on the same webpage and pulls the trigger. Reminding the viewer of this is important and a necessity for any equity crowdfunding video.

Don’t be subtle. Ask for an investment. Ask for money. I’ve had clients try to be clever and not want to mention their video is about getting people to invest. This misguided desire to be subtle and not ask directly for an investment reminds me of how some people run ads for an equity crowdfunding offering. They run an ad about something sexy, something interesting, something to drive a click on the ad — but never mention the ad is driving the person who click to an investment opportunity. This is almost always a mistake, and gets a click from someone who then finds out they are being asked to invest. People do not like being deceived. It’s a waste of ad money driving clicks from people who then get surprised, and not in a good way, that you are asking them for money to grow your company. If you are running ads and not telling people you are seeking an investment, you’re wasting your money and their time. Same thing with your video. If you suck them in, keep them excited and never tell them you are asking them to invest, you just wasted an opportunity.

Last, But Not Least — Good Sound and Video Quality Matter

Don’t get me wrong — you do not have to get Martin Scorsese to direct your equity crowdfunding video or use a Hollywood crew of 50 people to shoot a 2 minute video. I’ve seen great equity crowdfunding video that were shot on an iPhone and edited in iMovie. But even those paid attention to two important details: great video and good sound quality.

Great video means having good lighting and keeping everything in focus. Good sound quality usually means having an external microphone especially if you are using an iPhone. Nothing is` more unprofessional than a poorly lit video where the person talking isn’t using a mic, and it sounds like they are in a tin can or the Lincoln Tunnel.

The point is you are asking people to invest in your company. People want to invest in a company that will be successful. If you can’t invest a few bucks to make a great video when it is often the first and only impression a potential investor will have of your company, then you’re not projecting success to the audience that matters. If people think you can’t even make a decent video that looks and sounds good, why should they trust you with a much more difficult task of building and growing an entire company?

A few final words…

There is no cookie cutter, one-size-fits-all approach to an equity crowdfunding video. In fact, one video used to launch a Reg A offering that sold out and was oversubscribed, pretty much broke most of the rules above. Watch this equity crowdfunding launch video for Armed Forces Brewing Company  —  a military tribute brewery that pledges to employ 70% if their national workforce from veterans and their family members. The video is funny, silly, goofy and a parody of a lot of things. Some people loved it and shared it and it was seen by a huge number of people, Some people didn’t like it at all because it was too campy, but they remembered it. It features a famous person — retired Navy SEAL Robert J. O’Neill who shot and killed Osama Bin Laden, playing an over-the-top cartoon version of himself shooting and blowing things up.

Humor in an equity crowdfunding video is a big risk, and although this one paid off, it’s not always easy to do the right way. Armed Forces Brewing Company had a strategy from the beginning that they were going to market their company using humor and it worked for them at the beginning, and still works today as they are in a second Reg A offering as I publish this. Watch another of their promotional videos used during their Reg A offering.

Again, they break all the video rules, but it worked for Armed Forces Brewing Company. They oversubscribed their first Reg A offering and are on their way to doing the same in their second Reg A offering.

The point here is that every company is different and your equity crowdfunding video should reflect your company’s ethos, mission and character. Compare the BrewDog video above to the Wunderground video above. Two very effective videos, but completely different style, tone, and direction.

One thing I cannot overemphasize — get help from professionals when you create your equity crowdfunding video. The professionals may be your marketing team, your social media team, outside videographers or others. But this is an area where guidance, both technical (video, audio, music, graphics) and in the overall writing and presentation is invaluable.

Your equity crowdfunding video can make or break your Reg A or Reg CF offering. Don’t make the mistake of glossing over this incredibly important part of a successful online capital raise.

This article is not and should not be considered legal advice. Yes, I am a securities lawyer but no, you did not hire me to provide you with legal advice. In all cases, consult with your own lawyer as every legal situation is unique and do not rely on my educational and informative article as legal advice.

Reg A and Reg CF: Funding Portals and Broker Dealers and Online Investment Websites, Oh My!

Part Four of a Six Part Series Comparing Regulation A and Regulation Crowdfunding

See Part One Here, Part Two Here, and Part Three Here.

Once again, my AI image generator does its best to illustrate the title of this article. I’m fairly sure funding portals and broker-dealers are not really fighting to the death in an ancient Roman arena, and even if they are – the funding portal would probably have two swords like the broker-dealer, and not try to “gladiate” with one sword and one sword handle. And what the hell is a “funding poltal” anyway?

The two equity crowdfunding provisions of the JOBS Act, Regulation A and Regulation Crowdfunding (Reg CF) are very similar laws but also very different. While both opened the door to new capital formation for private companies — particularly allowing anyone to invest in these companies and not just wealthy people — the way these securities offerings are actually executed is very different and subject to hundreds of pages of SEC rules. One of the biggest differences is where a company may hold these offerings online. That is the subject of this new article in my series breaking down the similarities and differences of the two groundbreaking equity crowdfunding laws.

Can I hold the offering on my own website?

For Reg A — yes you can. For Reg CF, no you cannot.

Regulation A does not specify where the securities offering that can raise up to $75M may reside online. As a result, a company may hold the offering on their own website if they want. Or, they may host it on a website they do not own. Or, they could hold the offering on both at the same time. Reg A gives a company plenty of choices when it comes to where the offering is found online.

Not so with Reg CF. With Reg CF, your company may raise up to $5M but it must only reside online on an “intermediary” website. This means either a broker-dealer owned website, or a new entity that came into existence with Regulation Crowdfunding called a funding portal. A funding portal is a FINRA and SEC regulated entity that may only host Reg CF offerings. A funding portal is much like a mini-broker dealer — but with significant restrictions as to what it can do to help market your offering. You cannot hold a Reg A or any other kind of securities offering on a funding portal… they are exclusively for Reg CF offerings.

Why would I host a Reg A offering on my own website?

Let’s talk about Reg A where you can host the offering on your own website. If your company already has a large engaged customer base, social media audience, fan base or other large group of people who love what you do, then holding a Reg A offering on your own website is often a great idea. Or, if you have a large marketing budget to send huge numbers of people to your offering page, why not send them to your own website rather than somewhere else? You will still need software to process the investments, and in most cases you will need a broker-dealer behind the scenes to make the offering legal and compliant in some of the 50 states. But hosting the offering on your own website brings about many advantages.

First, you have complete control of the design and content on your own site. This keeps your branding consistent and the look and feel of your Reg A offering can be the same as the look and feel you already established for your company.

Second, you control the traffic. You are directing potential investors to come to your site, and not to a third party site. Think of it this way — a majority of the people your company drives to the Reg A offering page will not invest. They may watch your video and read about your company, but statistics show that only a small percentage will actually pull the trigger and become investors. On the other hand, every one of those non-investors now knows more about your company and your brand. They may well become customers, clients, social media followers, and fans. They can buy your product online or use your services perhaps, even if they don’t invest. If they were sent to a third party site and decided to not invest, they would then need to leave that site, find your company site, and then make a buying decision to have the same potnetial economic effect as if you just sent them to your site to begin with.

Third, you control the data. This is the most important one, and the fact that many third-party sites that host offerings do not tell you. When you host the offering on your own site, you have access to all of the data from the traffic you send there. When you are on someone else’s site, you may not have access to any of that data.

The most obvious benefit to this for experienced e-commerce folks is the ability to re-market to traffic. Through the use of pixels, Google Tag Manager, cookies and other well-known marketing methods, someone who came to your website may be remarketed to — but if they are sent to someone else’s site you may not have complete control over this. Think about how you look at that new pair of shoes online, and then for the next week all you see are those shoes in your social media feed, in ads alongside websites you visit, and even in emails. That could be your company reminding someone who is a hot or warm lead — they were interested enough to visit your Reg A offering page once — to take a second look and to get them over the investment finish line. Or, even if they do not invest, they can be marketed to as customers of your products and services.

The second most important benefit, and one somewhat related to the retargeting I mentioned above, is the ability to market to “abandons” or those who not only got to your offering page, but started to invest then dropped out for some reason. In my experience from being involved with a lot of Reg A and Reg CF offerings, at least 25% of people who start the investment process typically abandon the investment for one reason or another. If you are hosting the offering on your own site with software giving you transparency — you now have the ability to directly market to those folks who abandoned. Email marketing, text messages, phone calls — you know who these people are and you have their email address and phone number. Closing these hot leads can means hundreds of thousands of dollars, or even millions of dollars, in many cases. But if you are on someone else’s website, and they do not provide you with information about who abandoned the investment application, you left a lot of people who were interested in vesting and a lot of their money sitting on the table.

Should I use a funding portal for my Reg CF offering, or a broker-dealer?

Given that you have no choice with Reg CF and must hold the offering on someone else’s website, you have a choice to make. Do you want to hold it on a funding portal alongside dozens of other companies trying to raise capital from the same audience, or do you want to use a specialized broker-dealer that sets up a webpage they control for you that looks as much as possible like your company website?

This is a complicated question with no one-size-fits-all answer. But you have to pick one or the other because Reg CF requires you to only have the offering hosted in one place — unlike Reg A where you could have the offering simultaneously hosted in several places.

Let’s look at the factors that help determine whether your Reg CF offering is better off on a funding portal or a broker-dealer website.

Fees

Look at the fees charged by funding portals and broker-dealers in detail. As a general rule, broker-dealers will charge lower fees than a funding portal — but that is not always the case when you factor in all fees.

The “success fee” meaning the percentage of every dollar you raise that is paid to the funding portal or broker-dealer can range dramatically. Some funding portals charge upwards of 7% for this fee, while some broker-dealers charge far less. Some funding portals also charge an equity fee, where they get paid an additional fee of your company’s equity based on how much money you raise. Broker-dealers may also charge this equity fee for Reg CF.

That fee is only a piece of the puzzle to consider. The other three fees to be aware of are (a) any up-front fees (b) payment processing fees and (c) escrow fees.

Many funding portals and broker dealers charge up-front fees — even though they may defer those until your first closing. These fees can cover due diligence, setting up offering pages, and much more. It is not unusual to see this fee in the $5,000+ range. Make sure you factor this fee in when making a decision.

Payment processing fees are a whole different world, and can be very difficult to understand in some cases. When someone invests using a credit card, debit card or an ACH bank-to-bank transfer, there are companies in the middle of that process that charge to move the money around — these are the payment processors. Credit card fees can be 4% or more, which means, as a company, you are really only getting 96% of what you raise if you have to pay this processing fee. Keep in mind, you may be able to pass that fee along to investors — but how many of us cannot stand seeing that we as consumers are paying an extra charge when we buy concert tickets for example. You will lose some investors when they get to check out in the investment process and see that their $500 investment is really a $520 investment to get $500 worth of stock.

Make sure you get detailed payment processing fees from the funding portal or broker-dealer, including what fees you are charged if someone cancels their investment or attempts a chargeback. When you add up payment processing and the funding portal success fee, you are often at 10% or more of every dollar you raise going to pay for these services. Factor all of this in to your final decision as to where to host the Reg CF offering, and whether to pass some of those fees along to investors.

Escrow fees are the last piece of the puzzle. Reg CF offerings require a “qualified third party” — typically an escrow account — to hold funds from investors until they are disbursed to your company when you hold a closing. These escrow accounts come with additional fees — and those fees need to be factored into your hosting decision. Opening the escrow account alone can be a $1000+ charge, and breaking escrow to hold a closing typically also has a fee associated with it. Wiring your funds to you also has a fee attached. These fees can add up, especially if you hold multiple closings during your offering.

Data Transparency

I mentioned this earlier but this is something you absolutely need to know before you go with either a funding portal or a broker-dealer. Ask them what data you get from the investors you are sending to their website using your marketing dollars. Ask them if you get this data in real time through a dashboard. Most importantly, ask them what data you get when someone starts to invest, but abandons the process.

As I publish this article, major players in the funding portal industry still refuse to share any abandon data with companies using their services. So that 25%+ of people you paid to send to the funding portal who abandon the investment process — you will never even know they existed because some funding portals will not share any of that data with you — and they make some specious claims as to why they cannot share data with you that you have every right to possess. Sure, the funding portals know who those people are. The funding portal has their contact information. You paid for that investor to go to the funding portal and you do not even get the benefit of trying to close that investor. But you can be assured that those people you paid for are being marketed to by the funding portal for other companies raising capital on their site. At this time, you have a far better chance at transparency of this data with a broker dealer like Cultivate Capital (whose parent company I own part of, for full transparency) that specializes in Reg A and Reg CF offerings, and who gives you access to all of the available data rather than hiding it from you like some funding portals will do.

Target Amount. Another factor to keep in mind when choosing a funding portal or broker-dealer involves your “target” amount that Reg CF requires. Every Regulation Crowdfunding offering must set a target amount that must be raised in order to hold a first closing and get your new capital into your company bank account. Most of the bigger funding portals are now requiring that you raise the first $50,000 or more yourself before your company’s Reg CF offering is even shown to the funding portal’s investor base. This makes it difficult for a small company trying to raise capital on a tight budget, as you will not have access to this money to use for marketing the offering or otherwise until that target threshold is met.

Broker-dealers tend to allow you to set your target amount at a lower number to hold your first closing. They tend to not be as restrictive on how often you can hold a closing and get your money after the first closing when the target amount has been met.

What Other Rules Do They Impose? Both funding portals and broker-dealers may impose additional rules to how your offering can be structured. You need to find out up front what those rules are, as they may not fit within how you want your company’s investor base to look. For example, some funding portals will try to push you into using a SAFE, preferred equity, or some other structure that you are may not be comfortable with. A SAFE, in particular, can be confusing to new investors who may love your company already, but do not understand what they receive when they invest in an “agreement for future equity” versus a straightforward “here are your shares of stock in our company!” Ask about these requirements up front before you decide — and remember — when you are going to your customers, fans, social media followers and the like — the more difficult it is for them to understand their potential investment, the more likely they will not invest.

Audiences. This is one area that is very tricky and I can tell you without question based on my experience that many companies get sucked into picking a funding portal because of the number of “investors” on the funding portal. But beware of thinking that a funding portal with a large number of users means your offering will get funded by those people.

Let me use the exact words of one of the biggest funding portals to prove to you that the grand majority of investors in your offering will not come from the huge database of possible investors that the funding portal so highly touts as the reason to pick them.

“Do you have a strong community of friends, supporters, fans, or customers? Remember, about 67% of a typical (Reg CF offering) comes from the founder and team’s community, and the other 33% comes from our community. The first $50,000 comes entirely from your network, so it’s crucial to have the support of your community for a successful… round.”

While this funding portal says 33% comes from their “investors” my experience industry-wide is that it is almost always closer to 5–10% in most cases, and that 90–95% of investors come from the company raising capital and their marketing efforts.

Think about it logically. All of those investors on the funding portal got there because some company raising capital sent them there to invest in that particular company. Let’s say three of those companies whose investors are now part of the funding portal’s database were selling (a) glow-in-the-dark talking condoms (b) a moonshot flying car in the very early stages of development and (c) a cutting edge tech device that made clipping your toenails easier. Your company is a successful pizza restaurant chain that want to raise capital to expand and open new locations. Do you think there is any overlap in interest for your company and the condom, flying car or toenail clipper investors? No, there isn’t.

But once you send thousands of your pizza-loving customers and fans to the funding portal and they invest — the number of investors on the funding portal goes up again! And now your pizza fans and customers who became your investors are now getting marketed to constantly by the funding portal who is trying to sell your investors stock in companies that make glow-in-the-dark talking condoms, flying cars and hi-tech toenail clippers.

Broker-dealers may or may not do the same thing, so this is a question to ask before you make your final decision. But whatever you do, weigh the value of +/- 5–10% of the money you ultimately raise in a Reg CF offering coming from the funding portal’s “millions of investors” versus the 25% or more of investors you sent to the funding portal that abandon the investment process, but the funding portal never gives you any of their data to remarket to.

Making a decision about where to host your Reg A or Reg CF offering is more complicated than most think. It’s easy to get sucked in by the hype of big audiences of possible investors and to think this is a short cut to funding your company. It’s also easy to simply look at fees and to go with the lowest success fee. Consider all of the options, the money, the data, and everything else above before making a decision as to where your investors will see your equity crowdfunding offering.

#regulationA, #RegA. #RegCF, #regulationcrowdfunding, #equitycrowdfunding, #crowdfunding, #RegAPlus, #funding, #capitalraise, #fintech, #JOBSAct, #capitalraise, #smallbusiness, #smallbusinesstips, #securities, #securitieslaw, #equity, #StartupLife, #startups

Coming next week: Part 5 of the 6 part series: Specific Offering Structures and Liquidity. Also, this article is not and should not be considered legal advice. Yes, I am a securities lawyer but no, you did not hire me to provide you with legal advice. In all cases, consult with your own lawyer as every legal situation is unique and do not rely on my educational and informative article as legal advice.

Reg A vs. Reg CF: Which JOBS Act Equity Crowdfunding Regulation Is Right For You?

When the JOBS Act was passed into law in 2012, small businesses in United States were given the opportunity to finally be able to tap into the crowd – everyday people – to raise capital even if the company was a startup, early stage or otherwise not going to be able to attract private equity or venture capital money. After 80 years, the heart of the American economy, small businesses, could finally raise capital from anyone, not just wealthy or well-connected individuals or institutions, and still remain a private company.

Over the past few years, two provisions of the JOBS Act have allowed small businesses (and some large businesses!) to raise billions of dollars from investors that for decades would not have been allowed to invest. Regulation A (also called Reg A or Reg A+) and Regulation Crowdfunding, or Reg CF as many call it, changed the landscape for small businesses that needed money to grow. While most people decide which of these provisions to use based on the amount of money they are trying to raise (Reg A allows an offering of up to $75M in one year while Reg CF is limited to $5M per year) there are many factors to be considered by a company seeking capital that go far beyond the simple question of “How much do I need to raise?”

 As a securities attorney who has handled many of both types of offerings, and as a crowdfunding consultant who has helped direct the marketing and other non-legal facets of both Reg A and Reg CF offerings, I have some insights that most do not have. In this new series of articles, I’ll share many of the things companies need to consider when they choose which regulatory exemption from SEC registration to use in order to raise capital from the crowd.

 I’m going to break this down into several articles that I will post over the next few weeks to save you from having to read the War and Peace version of how to democratize capital raising all at one time!

 Also, note that Reg A involves two tiers: not-so-coincidentally named Tier I and Tier II.  because Tier I has limited use for most companies raising capital and is rarely used compared to Tier II.

 This week: The Basics.

 Who can raise capital?

 For both Reg A and Reg CF, only a company (usually a corporation or an LLC) can raise capital. Individuals cannot raise funds with either Reg A or Reg CF.

 Regulation A is only available only to companies organized in and with their principal place of business in the United States or Canada.

 Regulation CF requires the company raising funds to be organized under the laws of a state or territory of the United States or the District of Columbia. There is no “principal place of business requirement” for Reg CF which opens the door to foreign companies using the law with some restructuring.

 Who can invest in a Reg A or Reg CF offering?

 Anyone, regardless of their level of income or net worth, may invest in a Reg A or Reg CF offering. This includes anyone in other countries, as long as it is legal in their jurisdiction to invest and assuming there is no ban in the United States on that person or anyone from their country investing.

 Are their limits on how much someone can invest in a Reg A or Reg CF offering?

 There are no limits on the amount any person or entity may invest in either type of offering, if the investor is “accredited.” An accredited investor is defined in 17 CFR § 230.501(a) and there are many criteria that allow one to meet the definition, but the most common two categories are (a) any natural person whose individual net worth, or joint net worth with that person's spouse or spousal equivalent, exceeds $1,000,000 (not including the person's primary residence not included as an asset and indebtedness that is secured by the person's primary residence, up to the estimated fair market value of the primary residence at the time of the sale of securities, not included as a liability or (b) any natural person who had an individual income in excess of $200,000 in each of the two most recent years or joint income with that person's spouse or spousal equivalent in excess of $300,000 in each of those years and has a reasonable expectation of reaching the same income level in the current year.

 For an investor who is not accredited, they may still invest in a Reg A or Reg CF offering. In both cases, the amount one may invest is limited. In the case of Reg CF, it is further limited by the amount that person has invested in other Reg CF offerings in the past 12 months.

 I’d explain the formulas behind the limitations here, but it would only confuse you and make you ask yourself why these two provisions of the JOBS Act that basically allow companies to do the same thing to not have the same formula to determine how much money a non-accredited investors is allowed to invest. The good news is that this calculation is done behind the scenes through software that makes it fairly easy for an investor to determine how much they are legally allowed to invest. The other good news is that Congress didn’t put the burden on companies using Reg A or Reg CF to check the math or verify the numbers an investor uses. Unless the company is aware the investor is not “accredited” the company is allowed by law to rely on the investor’s representations.

How much capital can a company raise?

 In any one year period, a company may raise up to $5M with Reg CF.

 In any one year period, a company using Reg A may raise up to $75M with Tier II of Regulation A, and up to $20M with Tier I. This is commonly misconstrued to mean any company raising between $1-$20M must use Tier I, which is not true. A company may raise from $1-$20M with Tier I, and from $1-$75M with Tier II.

 I’m not going to get into the details of Reg A Tier I versus Reg A Tier II in this article for one simple reason: the use of Reg A Tier I is very limited for most companies. The reason for this in a nutshell comes down to one major factor: Reg A Tier II allows a company to raise capital anywhere in the U.S. without having to comply with every state’s Blue Sky laws while Tier I is the opposite and requires the issuer to comply with those laws in every state where investors will be solicited. Compliance with state by state Blue Sky laws is extremely expensive and could easily double or triple the cost of getting a Reg A Tier I offering live. Imagine having to have your offering circulars to raise capital undergo review by each state’s securities regulators, instead of just the SEC. Imagine the legal bills of trying to come up with filings in each state that are the same, and every time one of 50 state regulators or the SEC tells you to change one random paragraph, then having to go to all the other states again to make sure that they are happy with the change one regulator 2,000 miles away required. Imagine watching your bank account get drained as you pay even more attorneys’ fees.

 Suffice to say, Reg A Tier I is an often excellent choice to raise capital if you plan to only target residents on one state (an example would be a local restaurant who wants to open more locations in the same city), it is not a great choice for a company trying to reach investors across the fruited plain.

 How much does it cost to raise capital?

 For a company that is already formed, typically it costs approximately $15,000-$25,000 in out of pocket expenses to get a Reg CF offering live. The costs after the offering is live typically involve mostly marketing expenses, which can vary dramatically from case to case.

 For a company that is already formed, typically it costs approximately $50,000-$75,000 in out of pocket expenses to get a Reg A offering live. Just like Reg CF, the costs once the offering is live typically involve marketing expenses which can vary dramatically.

These numbers are general guidelines, and the cost could be far lower, or much higher, depending on all of the circumstances.

What legal documents do I have to prepare?

In order to start raising capital with a Reg CF offering, a company must file a document called Form C with the SEC which contains certain required legal disclosures, risks factors, company information, information about the securities you are selling, financial statements and more. Note that some funding portals – who are a sort of mini-broker-dealer – will offer to draft and file the Form C for you to save money. Before taking this extremely risky chance, consider the risks of allowing non-lawyers to draft legal documents for you that investors will be relying upon. Your company, and perhaps the principals and directors of your company, will be on the hook for whatever is contained in that Form C filing.  There are potential criminal penalties for those whose names are signed to these documents if they are not prepared correctly. Securities laws are complicated and paying a seasoned securities lawyer with Reg CF experience to draft and file this important document for you is something most prudent companies do.

 In order to start raising capital with a Reg A offering, a company must file a document called Form 1-A with the SEC. Typically, this is a far more extensive document than Reg CF’s Form C, even though it contains much of the same basic disclosure requirements. In reality, Form 1-A is basically a shorter form of a prospectus used by companies that hold an IPO. Form 1-A undergoes a review process with the SEC and must be “qualified” before you can go live and start raising capital.

 What financial and accounting requirements must I meet to file my proposed offering with the SEC?
This can get complicated, so I’ll give you the basics which apply in most situations.

Reg A is simple. With Tier II, all offerings must include up to two years of financial statements audited by an independent CPA. If your company is less than two years old, you must have audited financial statements from inception to the present.

 Reg CF is a bit more complex, and what financial statements must be included in your SEC filing depends on how much you plan to raise, and whether this is your company’s first Reg CF offering or not and whether the date of the offering is more or less than 120 days after the end of your company’s prior fiscal year.

 The basic rules are:

 If you are planning to raise less than $124,000, you may disclose internally created financial statements for the past two fiscal years certified as accurate by your management.

 If you are planning to raise between $124,000 and $618,000, you must disclose independent CPA reviewed financial statements for the past two fiscal years.

If you two are planning to raise between $618,000 and $1,235,000 and this is the first time your company has used Reg CF, you must disclose independent CPA reviewed financial statements for the past two fiscal years. If you have previously used Reg CF, you must disclose independent CPA audited financial statements for the past two fiscal years.

 If you two are planning to more than $1,235,000, you must disclose independent CPA audited financial statements for the past two fiscal years.

 Also, for Reg CF, if your company has audited financial statements available for the relevant time period, you must disclose those.

 After you start raising capital, are there any ongoing filings to make with the SEC?

 For both Reg A and Reg CF, there are ongoing reporting requirements. While none of these are as expensive or burdensome as those required of fully registered public companies, they are very important to remain compliant with federal securities laws. The main reports to be filed are discussed below, although other reports may be required.

 Reg CF only has one major ongoing SEC reporting requirement. An issuer that sold securities in a Regulation CF offering is required to provide an annual report on Form C-AR no later than 120 days after the end of its fiscal year and must post the report the company’s website. The annual report requires similar financial information to what is required in the Form C offering statement that is initially filed to start a Reg CF offering, but the financial statements do not need to be audited or reviewed by an independent CPA. This filing requirement ends when one of five events occurs:
(1) the issuer is required to file reports under Exchange Act Sections 13(a) or 15(d);

(2) the issuer has filed at least one annual report and has fewer than 300 holders of record;

(3) the issuer has filed at least three annual reports and has total assets that do not exceed $10 million;

(4) the issuer or another party purchases or repurchases all of the securities issued pursuant to Regulation Crowdfunding, including any payment in full of debt securities or any complete redemption of redeemable securities; or

(5) the issuer liquidates or dissolves in accordance with state law.

 At that point, the issuer may file notice on Form C-TR reporting that it will no longer provide annual reports.

 For Reg A, Tier II, there are more reports to file to remain compliant. Similar to Reg CF’s annual report on Form C-AR, Reg A issuers file an annual report on Form 1-K within 120 calendar days of the issuer’s fiscal year end. Form 1-K requires two years of audited financial statements. It also requires an update of information from the issuer to information previously filed. It also requires disclosures relating to the issuer’s business operations for the prior three fiscal years (or, if in existence for less than three years, since inception) as well as related party transactions, beneficial ownership of the issuer’s securities, executive officers and directors, including certain executive compensation information, management’s discussion and analysis of the issuer’s liquidity, capital resources, and results of operations.

And requires an update of information from the issuer requires issuers to update information previously filed and to provide disclosures relating to the issuer’s business operations for the prior three fiscal years (or, if in existence for less than three years, since inception) as well as related party transactions, beneficial ownership of the issuer’s securities, executive officers and directors, including certain executive compensation information, management’s discussion and analysis of the issuer’s liquidity, capital resources, and results of operations.

Additionally, Reg A Tier II requires a semiannual report to be filed on Form 1-SA within 90 calendar days after the end of the first six months of the issuer’s fiscal year. Form 1-SA requires issuers to provide disclosure primarily relating to the issuer’s interim financial statements and management’s discussion and analysis of the issuer’s liquidity, capital resources, and results of operations.

Reg A also requires an issuer to file a “current report” on Form 1-U within four business days of the occurrence of one (or more) of the following events: fundamental changes; bankruptcy or receivership; material modification to the rights of securityholders; changes in the issuer’s certifying accountant; non-reliance on previous financial statements or a related audit report or completed interim review; changes in control of the issuer; departure of the principal executive officer, principal financial officer, or principal accounting officer; and unregistered sales of 10% or more of outstanding equity securities.

 How fast can I get an offering live?

 This is a hard question to answer because there are so many variables. One variable – how long it takes your company to get its financial statements done - almost always takes longer than expected and without those statements, you cannot file with the SEC under Reg CF or Reg A.

Some companies do not have their books in order, or their books are not to GAAP (Generally Accepted Accounting Principles) so there can be delays getting the basic financial statement requirement complete which holds up the entire process.

 But realistically, I tell my law firm clients that it is about a 3 month process to get a Reg CF offering live from the time I am hired, and a 4-6 month process to get a Reg A offering live. That being said, there are times I have been able to get an offering live on a shorter timeline, and times it took longer than those estimates.

 Coming next week: Part 2 of the 6 part series: How Does a Company Receive The Capital It Raises? Also, this article is not and should not be considered legal advice. Yes, I am a securities lawyer but no, you did not hire me to provide you with legal advice. In all cases, consult with your own lawyer as every legal situation is unique and do not rely on my educational and informative article as legal advice.

Everything you wanted to know about crypto offerings but were afraid to ask

With Securities and Exchange Commission Chair Jay Clayton making the public announcement last July he believes every ICO he’s seen is a security, every company in the cryptocurrency, blockchain and token world was put on notice that raising capital by selling coins or tokens was entering a different phase in the United States. As a result, securities lawyers like myself, have been flooded with calls and requests for our services.

I was interviewed by one of my favorite journalists, Tony Zerucha at Bankless Times, about how ICOs, token offerings and the like can be legally done these days and you can (and should) read the entire published article here. For those who want the CliffNotes version, here you go:

• Any U.S. company that wants to raise capital by selling coins, tokens or cryptocurrency, and any company that wants to access the 325 million potential investors who live in the United States, must follow securities laws at this point. With my work in the JOBS Act legal realm, I have been been talking to dozens of crypto companies. Because the grand majority will use one of two JOBS Act provisions: Regulation D, rule 506(c) (if they limit the offering to accredited investors), or Regulation A+ if they want to access the entire U.S. population, those of us who specialize in JOBS Act offerings and equity crowdfunding have become quite popular.
• I've lost count of the number of companies I have had to turn down at this point because they already have done something that is not compliant or legal. The first step is to make sure each company has not already screwed up what they want to do because they were not well informed as to how they should proceed. I ask some pretty simple questions to start, and you would be surprised at how few companies have the right answers.
• I start with the basics. I ask every company to explain to me in a sentence why they need a token and how blockchain is integral to their business. If I had a Bitcoin for every company that came to me with a concept that used the term “blockchain” or “token” without even knowing what it meant or how it was going to be used, I’d be a Bitcoin billionaire. Or maybe a Bitcoin millionaire, depending on the fluctuating exchange rates.
• You would be amazed at how many people cannot answer this question in one hour, much less one sentence. Some businesses do not need a blockchain, or a token. For example, I do a pretty good job of running a law firm without a blockchain. A pilot does not need a coin to fly an airplane. A chef does not need a utility token to cook a perfect steak. I realize that blockchain technology is revolutionary in many ways for many things. But, you can’t just throw the term “blockchain” into every business model. If a company is not able to explain in simple terms why they need blockchain in their business, they probably don’t need blockchain, and probably should not be doing a coin offering.
• I hate it when I hear, “Kendall, our pre-sale is next week. Would you take a look at our white paper and be sure we are okay?” If they are already online soliciting for their sale, there is a good chance they’ve already violated a law or two. And if they already have anything scheduled in terms of a sale, it’s probably too late for any securities lawyer to help unless they are willing to pump the brakes.
• I also hear this one a lot: “We’re okay because we’ve hired” followed by ‘a top ‘ICO’ ‘Blockchain’ or ‘Crypto’ consultant on our Board of Advisors.”  I ask these companies if their advisor is a securities attorney who has experience with the JOBS Act and securities token offerings, and then I look at my iPhone to see if the call has been disconnected because there is always dead silence. Ninety-five per cent of these “crypto experts” have absolutely no idea how to do a securities law-compliant token offering in the United States, and many charged these companies a lot of money to give them bad advice.
• I received a ton of emails, most of them spam, over the past few years with the newest hottest ICO offers, and I saw the news about the crazy amount of money being raised. I think most securities lawyers saw these ICOs raising millions with no disclosures, no investor protections, no financial statements and no real information revealed other than hype and the repeated use of the term “blockchain.” Not only were these obviously sales of securities, many of them were just blatant scams that couldn’t pass a sniff test in allergy season. No, I can’t say that seeing the SEC jump in and state regulators filing enforcement actions and class action suits being filed was at all surprising.
• A company needs to assume that what they are selling is a security, because the SEC is certainly going to assume that. You can’t call something a “utility token” and assume you can get away with not following securities laws. It does not matter what you call it, if it cannot pass the Howey Test, or if you are selling it with the idea that the purchaser may be buying something that will increase in value over time, you should treat it like a security. There are well defined exemptions that allow U.S. companies to sell securities without registering, so follow those laws in your token sale, and the capital raise portion should be legal.
• To me, Reg A+ is the holy grail for token security offerings. Everyone can invest, not just rich people. The tokens sold can immediately be listed on an Alternative Trading System (ATS) and are liquid and tradable. I love that the SEC must qualify a Reg A+ offering before it can be sold. This means if you have any problems in your offering, there is a likelihood it is going to be flagged by someone at the SEC before you start selling, rather than after when something goes wrong like with Reg D or Reg S. It is not cheap to do, but nowhere near as expensive as an S-1 and full registration with the SEC. You will have ongoing reporting requirements and a company is limited to raising $50 million per year. While most companies would be thrilled with raising $50 million per year, this limitation would prevent some companies from using Reg A+ if their capital needs are higher. That said, a Reg A+ raise can be done in conjunction with a Reg D offering, if it’s structured correctly, to raise more that the limit.
• The big questions are: What happens after someone purchases the token or coin? Can they sell it outside of an ATS? How? Can they use it as a currency? Can they use it as a utility token? There is a huge amount of uncertainty as to how the courts and regulators are going to treat security coins and tokens after they are in the hand of investors. This is one reason why I like Reg A+ so much. As soon as the offering closes, the Reg A+ securities tokens may be listed on a secondary trading platform and be bought or sold. This immediate liquidity is a huge selling point. There are rules and restrictions that limits sales under Reg D and Reg S, so this is not possible with either of those exemptions.
• My experience is that the SEC is very open to this new method of raising capital, as long as you follow securities laws and protect investors. The SEC is well aware that if they shut down all crypto offerings, another country will become the leader in this area, and billions of dollars of capital will flow out of the U.S. They do not want this to happen, so they are working with securities lawyers and their counterparts at the CFTC, Department of Treasury, FinCen and others to try to find solutions. Yes, you have a target on your back if you do a crypto offering. But, as long as you have a justifiable legal basis in securities law for what you plan to do, the chances are the SEC is not going to stand in your way.

As I said in the interview, the days are gone of some random millennial plagiarizing a white paper found on Google while their tech geek buddy sets up a website to promote and accept Bitcoin for an ICO followed by millions of dollars magically appearing, unless those people want to risk going to jail or being sued.

Anyone who wants to do this right in the U.S. is going to need experienced securities counsel. They are very likely going to need a licensed broker-dealer. They are going to need a secondary trading platform. They are probably going to need accountants and maybe auditors. Doing this right is not going to be cheap. But, then again, getting sued or arrested and having your business shut down is far more expensive than simply doing this legally and compliantly from the beginning.

Read the entire interview here, to learn more:

BrewDog plc Gives Original Investors a 2,765% Return: Equity crowdfunding has a poster child.

Originally Published at Entrepreneur.com on May 10, 2017

BrewDog plc, the irreverent Scottish craft brewery that has built a successful international business through many rounds of equity crowdfunding involving 50,000+ online investors, recently announced that a U.S. private equity company has acquired approximately 22 percent of the company in a $264 million transaction. This minority investment values BrewDog at $1.24 billion.

BrewDog's Lineup of Craft Beer

Most importantly, this transaction allows BrewDog's “equity punks” -- the name for its shareholders who invested in the company through crowdfunding -- to sell a portion of their stock to the private equity firm, providing some liquidity to these investors. By doing so, BrewDog has offered a substantive response to critics of equity crowdfunding who wonder how small investors will benefit from these types of offerings.

Keep in mind, BrewDog is still a private U.K. company. Their shares are not publicly traded on any exchange, which also gives some liquidity for their early crowdfunding investors, despite the company remaining private. For those who invest in private companies, whether through crowdfunding or otherwise, we all know returns on private company investments before the company becomes public are few and far between.

James Watt, BrewDog’s co-founder, explains: “Shares purchased in Equity for Punks I are now worth 2,765 percent of their original value. Even craft beer fans that invested in Equity for Punks IV, which closed in April 2016, have seen the value of their shares increase by 177 percent in just one year.” The deal gives BrewDog plc’s army of equity punks the opportunity to sell 15 percent of their shares (capped at 40 shares per investor) at the $1.24 billion valuation.

BrewDog Founder Martin Dickie and James Watt

This has tremendous significance to the world of equity crowdfunding. With Regulation CF, where a startup company can raise up to $1 million online, and Regulation A (the “Mini-IPO”), where a company can raise up to $50 million online from anyone in the general public, the popularity of raising capital online grows every day. Crowdfunding has become a multi-billion industry in a very short period of time. But because the JOBS Act, the law that made equity crowdfunding legal, only went into effect in 2015, success stories with an exit for investors are rare. BrewDog's success, using U.K. laws very similar to the JOBS Act, and leading to a return on investment for those who backed the company online for the past few years, bodes well for the development of equity crowdfunding under the newer U.S. laws.

This is welcome news to those in the equity crowdfunding industry. It was not long ago that the $2 billion buyout of Oculus by Facebook caused the media and many rewards crowdfunding backers to lose their minds. Oculus had run a rewards-based crowdfunding campaign on Kickstarter that raised $2,437,429 from 9,522 backers. In rewards crowdfunding, no shares in the company are sold, but rather the backers received the virtual reality hardware and software in return for a donation. When Facebook acquired Oculus for a couple of billion dollars, some backers from the Kickstarter campaign went ballistic, claiming they did not receive a return on their “investment.”

At the time, a New York Times editorial and a Bloomberg column showed that even the media failed to grasp the huge difference between rewards-based (a donation) and equity crowdfunding (an actual investment). The Bloomberg article even accused Oculus of pulling off a scam because the supporters of its Kickstarter campaign did not get a share of the profits from the buyout. One blogger was so angered that he wrote an article with one of the better headlines in the history of blogging -- “I'd Rather Stick My Head In A Whale's Blowhole Than Play Facebook's Oculus Rift.”

As I pointed out at the time, each of Oculus’ 9,500+ Kickstarter backers knew that they were not investing in the company, and that they were not getting equity when they swiped their credit cards in exchange for an early version of Oculus’ new VR headset. Had equity crowdfunding been legal in the U.S. at the time, and had Oculus run the same campaign on an equity crowdfunding website, those who invested would likely have seen phenomenal returns. However, equity crowdfunding wasn’t legal at the time.

Now, equity crowdfunding has its poster child.

BrewDog has raised tens of millions in several equity crowdfunding rounds since 2010. They have built a community of tens of thousands of people who have not only invested, but who have also become brand ambassadors and evangelists for everything BrewDog. And now, those investors will have an opportunity to not only continue to savor the perks of having invested, like free beer and online discounts, but also to see a financial reward for their equity crowdfunding investment.

BrewDog plc's headquarters and Scotland brewery

Equity crowdfunding finally has a success story that should spur on the growth of this nascent industry. BrewDog has given us an example of how investing in equity crowdfunding offerings is far different than donating to a Kickstarter or Indiegogo campaign. Investors finally have an example of how an equity crowdfunding investment can bring them a very real return.

How Will Donald Trump's Presidency Affect Crowdfunding?

Image credit: Joe Raedle | Getty Images

Originally published at Entrepreneur.com on January 10, 2017

Donald Trump will soon be inaugurated as the country’s 45th president and will potentially impact the burgeoning crowdfunding industry in a "yuge" way. Before I share my thoughts as one of the country’s top crowdfunding attorneys, let me tell you what five industry leaders believe the Trump presidency will mean for crowdfunding.

Disclaimer: This is NOT a political article. For those on the right, please don’t send me red baseball caps embroidered with “Make Crowdfunding Great Again.” For those on the left, please do not label me or the crowdfunding leaders in this article as “deplorable” or worse.

Indiegogo has been at the forefront of rewards crowdfunding since the very beginning. Indiegogo’s co-founder and Chief Business Officer, Slava Rubin, had this to say: "It's obviously impossible to know exactly how the next four years will play out since the new administration hasn't moved into the White House yet. Trump's platform included easing up on banking regulations -- which the stock market has reacted well to -- and it will be interesting to see how that translates for equity crowdfunding. The one year anniversary of Title III is coming up this May, so that will be a good time to examine what kind of progress has been made under the new administration."

RocketHub was one of the world's pioneering crowdfunding portals and has developed into a global community for entrepreneurial growth through a partnership with luxury lifestyle network ELEQT. RocketHub's CEO Ruud Smeets shared his take on the Trump presidency.

“Any abrupt change in the political landscape is a challenge and can have ripple effects throughout one's business," Smeets said. "Having a strong support 'crowd' can be a great benefit to any entrepreneur, especially in times of change. The emerging Trump presidency may create more volatility, but it also holds the promise of potentially bringing less regulation and more freedom for innovation and entrepreneurship. That would be good news for alternative funding options like crowdfunding, which still is a highly regulated market space with certain barriers to growth. It remains to be seen though how Trump’s plans on healthcare, international trade, isolationism and any attendant currency effects will affect small business ownership as a whole.”

Roy Morejon, whose firm Command Partners has been one of the most prolific and successful PR and marketing agencies in the crowdfunding space said the initial effects of a Trump presidency seem to be positive for the crowdfunding industry. Recent meetings with top technology leaders from Apple, Microsoft, Amazon, Facebook, Intel and Tesla seemed to be productive with innovation and jobs being a top priority.

"With Trump's business background, American innovation and job creation should flourish," Morejon said. "At our crowdfunding marketing agency, we're seeing a flurry of activity in the equity crowdfunding space in hopes that Trump will alleviate some of the red tape with some of the current crowdfunding regulations.”

Ruth Hedges is one of the pioneers of the JOBS Act and executive producer of the Global Crowdfunding Convention, the largest and longest running crowdfunding convention in the country. Here are her thoughts on the Trump presidency related to crowdfunding: "As America enters uncharted waters with social safety net programs and medical insurance for 20 million people threatened with destruction, we'll need to call on crowdfunding to provide help to those people who will surely suffer, because crowdfunding is not red or blue, black or white, Christian, Muslim or Jew. It is not left or right, but showcases the best of our humanity. And it demonstrates the potential to bring together people from all backgrounds and beliefs to work for our common good as Americans."

Craig Denlinger is one of the go-to auditors for financial reports needed to comply with equity crowdfunding laws. His firm, Artesian CPA, has provided the SEC financial filings for several companies using Regulation A+ to raise capital. Denlinger said "while it is difficult to decipher between what Trump says and what Trump intends, I anticipate that Trump will be a positive force for the crowdfunding community based on his words and actions to this point. With the incumbent SEC Chair Mary Jo White set for early retirement next month, Trump is poised to appoint a more regulation-averse head of the agency looking to scale back on barriers to innovation and job creation. Trump’s planned federal hiring freeze and quotes such as 'eliminating two regulations for every one created' or 'rank all regulations and cut those least important' further confirm this belief.”

The experts have spoken. Here is my two cents.

The “crowd” is a dynamic group that effects change one dollar at a time. With its support, Pebble Watch raised $32,000,000+ in two Kickstarter rounds, BrewDog raised more than $40,000,000 through several equity crowdfunding offerings, and countless other ideas and businesses have been afforded the opportunity to succeed. Crowdfunding brings people together in a way that is truly American because political affiliation isn't a factor in the equation. Each project or offering can be a melting pot of Democrats, Republicans and maybe even Whigs -- anyone can support a business they like regardless of gender, race or religion. Even Congress managed to find common ground to pass the JOBS Act with bipartisan support.

Because navigating the legal maze of rules and regulations is presently the biggest thing hampering equity crowdfunding, President Trump will have a positive influence on the industry if he delivers on his promise to reduce regulations. Reducing regulations will slash attorney fees and compliance costs for companies wishing to use equity crowdfunding. I truly hope the Trump administration will remove unnecessary red tape and open the door for even more democratization of the capital formation process through equity crowdfunding.

And, if the new administration wants to create a new unpaid cabinet position of “Secretary of Crowdfunding” to help them reduce the barriers to entry for small businesses, I happen to know a lawyer/writer/entrepreneur who lives in D.C. and might be available to fill that role.