Venture funding has dropped by more than 50% since 2022; the private market is a viable alternative for entrepreneurs seeking funding in an uncertain VC climate
With the latest happenings in the online banking world, venture capital funding is uncertain for the short term. Yet challenging times are when capital for innovation and development is needed most, leading companies at all stages to evaluate a different alternative for capital: the private market.
Venture capital refers to investments made by venture capital firms, typically in early-stage startups or companies with high growth potential. Private capital, on the other hand, can come from a variety of sources, such as high-net-worth individuals, family offices, or private equity firms. These investments are made in countless industries and stages of development.
Another difference that may lead entrepreneurs to opt for private capital is that, in most cases, venture capital firms take an active role in the management, while private capital investors do not – which allows entrepreneurs to retain control.
Oscar A Jofre, Co-founder and CEO of KoreConX, explains. “Using digital platforms to raise funds from investors through JOBS Act regulations, companies have access to the exemptions from SEC registration such as RegA+, RegCF, RegD, and RegS, reaching a larger pool of investors beyond traditional VCs and private equity firms. These investments can be accessed by anyone, regardless of their net worth or accreditation status, and at any time, 24 hours a day, 365 days a year”. The SEC reports that $4.5T was raised in the private capital markets in 2022, of which the new JOBS Act regulations (RegCF, RegA+, RegD) accounted for $150.9B.
Online capital formation platforms allow greater transparency, giving investors more information about an offering before they commit to investing in a particular business. This allows investors to make more informed decisions and reduces the risks associated with investing. Online platforms also typically charge lower fees than traditional VCs and private equity firms, making it a more cost-effective way to raise funds.
Taken together, these advantages make online capital formation through RegA+, RegCF, RegS, or RegD attractive, viable alternatives to traditional venture capital for companies looking to access a wider pool of investors quickly and efficiently and with greater transparency.
Founded in 2016, KoreConX is the first secure, All-In-One platform that manages private companies’ capital market activity and stakeholder communications. With an innovative approach and to ensure compliance with securities regulations and corporate law, KoreConX offers a single environment to connect companies to the capital markets and now secondary markets. Additionally, investors, broker-dealers, law firms, accountants, and investor acquisition firms, all leverage our eco-system solution.