Regulation D and Crowdfunding | Accreditedinvestorleads.com
Regulation D Accredited Investors Can Help With Your Crowdfunding Campaign
If you have launched a crowdfunding campaign, Regulation D Accredited Investors can help to give you the capital you need to meet your goals. The “crowd” is an amazing thing, primarily due to the momentum it gives you going forward with your company. All of the people that participate in your crowdfunding campaign can turn into lifelong customers and fans that help to spread the word about your company organically. Typically, these individuals give money in exchange for a reward, prize, or product that you are creating. Since they don’t get equity, the dollar amounts are typically low, so it is all about quantity.
Regulation D Accredited Investors can help to bridge the gap between the money you raise from the crowd and what you need to complete your capital raise.
Many investors want to see a level of acceptance from consumers before investing in a company. This gives them a sense of assurance that you will be successful, and that the only thing that may stand in your way is a lack of capital. Angel investors, for example, will often ask how many customers you currently have and what stage your company is in. When you have backers, you have built in customers, which can help to jump start the company’s official launch. This is an advantage for raising money and an advantage for ensuring that your company can sustain once you do.
Reach Regulation D Accredited Investors by purchasing a leads list from www.accreditedinvestorleads.com. This list can be sorted by demographics and location to help you reach a targeted group of investors in your local area. If your company has a national reach, you can buy a large list of investors throughout the country that may be interested in participating. A crowdfunding campaign does not require a private placement since you are not actually giving away equity. Raising money from accredited investors does. Before you start calling you need to have your private placement and executive summary finalized so that you can have a detailed conversation with investors.
When creating your financial projections, let them know how much capital you have been able to raise through crowdfunding and how many unique backers or customers that represents. Explain to investors how their investment can help take the company to the next level so that you can accomplish financial success for the company and generate a return for them. Painting a picture is an important step and fortunately, your crowdfunding campaign will have already given you a proof of concept.
Remember that Regulation D Accredited Investors are an elite group of sophisticated individuals. They typically are well educated and make significantly more money than the general population. Expect them to ask hard questions and wants specific data. Be prepared to make your best sales pitch and use your crowdfunding campaign to demonstrate the potential of your company.
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Regulation D is the most common SEC exemption used to raise capital, however, Regulation A has distinct advantages. The best way to describe Reg A is as a bridge between Regulation D and a public offering. It gives you advantages from both. You are limited to raising 5 million in a twelve month period so if you need a larger amount, Reg D Rule 506 is still your best bet. The SEC is considering raising that amount to 50 million and once they do, Regulation A will become a more viable option for large raises as well.
Why you should consider using Regulation A to raise money.
With Reg A you do not have to complete an official filing registration with the SEC, as you would when going public. Instead, you need to file a Form 1-A that includes the offering circular, disclosures, and addendums. The SEC has a provision in Regulation A that allows you to “test the waters” to see if investors are interested in your offering before filing the paperwork. This is a distinct advantage for companies that are working with limited resources. As long as you don’t accept any capital prior to filing the forms, you can promote your offering and see if investors are interested in participating.
In Regulation A you are allowed to raise capital from non-accredited investors. This is a huge advantage for companies that don’t have an investor network or feel their company or product would appeal to the masses, rather than a set group of investors. You can still accept capital from accredited investors but are no longer limited to working with them only.
You are also able to advertise your offering with Regulation A. You can do so on the radio, print, television etc. The advertisements should conform with ones from a public offering. This is a distinct advantage over Regulation D, which only allows advertising in Rule 506 (c) and you are only allowed to advertise to accredited investors.
The securities are not restricted so investors can sell them and liquidate at any time. This gives investors more flexibility and the option to either hold their shares long term or sell them as needed. One concern investors often have with Regulation D offerings is when and how they will be able to liquidate. This provision within Reg A eliminates that concern.
There are three formats companies can choose from when completing their offering and disclosure documents, including a question and answer format. This makes the process of preparing a Reg A offering fairly straightforward. Since you don’t have to file until you know people are interested, you can save a lot of time while perfecting your offering statement.
If you are looking to raise capital there are multiple exemptions from registration that you should explore. The decision on which one to use should be based on your strategy for marketing the offering, how much you want to raise, where your investors are located, and the amount of time you have to complete paperwork. Understanding your goals and capabilities prior to issuing a private offering will help you to be more successful.