What is Investment Crowdfunding?
It is a new way to raise capital from your community, customers, professional investors, and other supporters of your business. Investment Crowdfunding uses a specific set of securities exemptions, marketing strategies, and technology combined with your business's compelling story to facilitate the raise process in a way that is efficient and effective for both your business and the investors.
This is just for businesses who want to raise from non-professional investors, right?
Actually, it's for your business to raise funding from any type of investor. Your business can perform a private 'traditional' raise to 'strategic investors' or a known group of accredited investors. Your business can also perform a public raise allowing anyone to participate. Your business can even perform a side-by-side (aka "Concurrent") offering where you can strategically group accredited and non-accredited investors into separate exemptions, allowing you to potentially raise more funding.
Why is Investment Crowdfunding a strategic way to raise capital?
Unlike the offline raise process, Investment Crowdfunding provides your business the ability to make your raise strategy match your business strategy, not the other way around. You get to choose which investor base you're making an offering to and what your terms will be to each investor base. You can create equity and/or debt offerings, and you work with your advisors to determine the terms of the offering. Our advisory services and partnership with Localstake helps guide your business through this decision process.
How is my business able to raise capital from anyone, accredited or non-accredited?
Our partner platform is a registered Broker Dealer. As a Broker Dealer, they allow your business to sell any type of exemption available which means you can pick exemptions which best meet your business's strategy. A variety of traditional and new offering exemptions can be used by your business.
- 504 – Private Accredited and Non-Accredited
- 506(b) – Private Accredited
- 506(c) – Public Accredited
- Regulation Crowdfunding (aka Reg CF) – Public for anyone to participate
- NC PACES – NC Businesses only and public for any NC resident to participate
- Reg A+ aka Online Public Offering (OPO) - Public for anyone to participate
Another option is to make a website yourself if you prefer to use a smaller offering type called a Local Public Offering (LPO). But if you make your own, your website has to be compliant with the PACES law and the rules on the NC Secretary of State website, so you should get familiar with those too. Read the FAQs first, then the PACES Act rules to get a good idea how this all works.
How much can be raised using Investment Crowdfunding?
Based on results across the industry, typical raises are $100K minimum, $250K on average and can go into the millions based on the exemption chosen.
Exemption fundraising limits are as follows
- 504 – usually up to $5M per year
- 506(b) – no cap
- 506(c) – no cap
- Reg CF – up to $1.07M per year - Potentially Raise More with a Concurrent Offering
- NC PACES – up to $2M per year
- Reg A+ – up to $50M
If your business is just getting started, first, just as you would with any other source of funding, create a viable business model and plan, and build traction points. Successful traction points could include:
- Successful Minimally Viable Products (MVPs) or Proof of Concepts (PoC)
- Strategic partnerships established
- Purchase Orders or Letters of Intent secured
- Revenue generation
- The company vision
- The problem to be solved
- The product or service solution
- Identification of the target market and how to reach it
- A business plan and model that works
- The team that that can make the business a success
- The traction the company as achieved
- The milestones and metrics the company anticipates
- Use of funds to achieve those milestones
- An analysis of the competition
- The existing financial condition of the company
- A reasonable financial projection going forward
- The terms and disclosures of the investment offering