Regulation Crowdfunding lets an operating company raise money from the public, accredited and non-accredited alike, through an online intermediary. It suits companies with an engaged customer base and a raise measured in hundreds of thousands to a few million dollars.
The core limits
- A company may raise up to $5 million under Reg CF in a 12-month period.
- Every offering must run through a single SEC-registered funding portal or broker-dealer.
- Non-accredited investors are subject to individual investment limits based on income and net worth. Accredited investors are not limited.
The Form C and your financial statements
The offering is made on Form C, filed with the SEC and posted on the platform. It describes the business, the management team, the terms of the securities, the use of proceeds and the risks. The financial statements required scale with the size of the raise. Smaller offerings may use statements certified by the principal executive officer, mid-sized offerings require statements reviewed by an independent accountant, and larger offerings generally require audited statements, with some relief for first-time issuers. The dollar thresholds are adjusted periodically, so confirm the current figures when you plan.
Communicating about the offering
You may advertise a Reg CF offering, but what you say is regulated. Outside the platform, communications are limited to specified information and must direct investors to the portal. Once the offering is live, conversations with investors about its terms should happen on the platform’s communication channels.
After the raise
Reg CF issuers must file an annual report on Form C-AR within 120 days after fiscal year end and post it on their website, until an exit condition applies. Every new shareholder is also a relationship you will manage for years: plan your cap table, your investor communications and your next round before you launch.
The most common Reg CF mistake is treating the campaign as marketing and the Form C as paperwork. Investors are relying on the Form C. Draft it with the same care as a PPM.
This article is general information, not legal advice, and reading it does not create an attorney-client relationship. Rules change; talk to counsel about your specific situation.
