One of the significant advancements brought to the financial sector in recent years was the enaction of the JOBS Act signed into law by President Obama on April 5th of 2012. Within that legislation contained a form of raising capital for private companies available to any American, whether they were accredited investors or not. This was Regulation CF or regulated crowdfunding.
When Reg CF was implemented, it limited the amount an unaccredited investor could invest and how much a private company could raise. In March 2021, the limit a company can raise increased to a maximum of $5 million within 12 months. Previously, before the introduction of Reg CF, it was challenging for the average investor to invest in a private company, as they did not have the capital to do so. This is now possible through Reg CF, which uses equity crowdfunding platforms to connect investors and private companies.
Funding portals are regulated by FINRA, which imposes compliance on the organizations that provide the service and includes regulatory oversight and reporting requirements. FINRA has a list of funding portals registered and regulated by FINRA, which is the first thing to check when considering a funding portal.
Part of the value of crowdfunding platforms for private companies is establishing demand and a proof of concept. If people are willing to invest in a Reg CF offering, it shows that people want a product or service to succeed. So, choosing the correct equity crowdfunding portal for you depends on the user base of that platform. For example, let’s look at three portals to see the differences of who is investing on those platforms.
FanVestor is a platform predominantly for celebrities looking to raise money for a product or a charity. If, as a private company, you are among this group of people, this would be an effective platform, as investors would look here for you. In contrast, if you are a startup, you would be looking at portals like Republic or WeFunder. These two portals focus on startups, with Republic focused on real estate, video games, and crypto, and WeFunder, focused on giving small businesses and startups an alternative to venture capital and banks; their focus is “fixing capitalism.”
Look at where the investors are and what they are excited about, and then match that with your goals and vision. This is the best way to choose the right funding portal. It puts your company in the best place to raise the most capital and take your vision from dream to reality, with the backing of investors that believe in you.
Beyond that, look to see which platform is the most beneficial for your situation. Consider how much they will charge and help you with the campaign. The purpose of working with a funding portal is to put your company, product, or service in the best possible position for success. The right crowdfunding platform will balance your weaknesses with their strength.