Today I’d like to talk with you about changes that have occurred in capital raising during the time of COVID.
I’m curious and would love to hear back from you guys… are any of you participating in online investing? Through platforms like Venture360, Crowdstreet, Alumni Ventures Group, and many, many others. Another company I’m familiar with, Texture Capital, has just launched a platform where they will be utilizing blockchain for security purposes and the purpose of online investing, which I think will be the wave of the future.
Just reviewing some of the changes that have come down the pipe through the exchange commission: many of these were set in place many years ago, starting in 2012 when the Obama administration originally passed the JOBS Act, which allowed on a very limited basis, crowd-funding for capital purposes. Crowd-funding had been around for a while. Kickstarter piloted that effort, but it took the JOBS Act to actually allow people to do it for the purposes of raising monetary items for equity, money for equity in a crowd basis.
So the JOBS Act kicked that off. There’ve been many changes. The JOBS Act also had ramifications for Regulation A, which they came out with, which is a de facto IPO, which is a crowd-fund. Lots of restriction in the beginning, many of those restrictions have been laid off. They’ve actually come back with Reg A Plus, and last week the SEC announced that the limit of capital that can be raised through Reg A Plus is $75 million. It’s unbelievable! When it first came out in 2012, the limit was $2 million.
But there’s been a lot of changes under Regulation D as well. Regulation D has been around since the original 1933 act. Reg D is the one that controls private placement, private offerings of securities in connection with state regulations, of course. There are many exemptions for registrations under Reg D. One in particular that is important for today is Rule 506c which does allow for “general solicitation” of offerings. Of course, you can only do business with accredited investors, but there’s also been updates to the definition of “accredited investors” which includes people such as brokers who might not meet the definition of income or net worth measurements, which has been the case since the act was originally released. But now they’re adding more professionals such as brokers who are familiar with and basically should know what they’re doing.
Would love to hear from you guys on this. We are engaged in helping clients raise capital, so if we can be of help or talk to you about that, just let us know. Make sure to check out our YouTube channel for more quick, useful content!