May 2016 ushered in a new securities law to allow practically anyone to invest in the next big thing. Joe Nobody could enter the world of private equity investing and have a chance to get in early on the next Twitter or Lyft.
Known as Regulation Crowdfunding (Reg CF) or Title III, this provision of the JOBS Act of 2012 was designed to increase access to capital for small to medium businesses by broadening the base of investors to include non-accredited investor types earning less than $200,000 a year with a net worth below $1 million. Good news for growing businesses with a strong community.
So, how do you prepare to raise capital for your company using Reg CF? The rules are slightly different. You can’t advertise or talk about it until it’s time. Due diligence is key and the more you do your homework the better your chances are for success. Kim Kaselionis, founder and managing partner of Breakaway Funding, along with Oscar Jofre, Jr. the CEO and founder of KoreConX, discussed this at length in a recent webinar, “How to Prepare for a Title III Capital Raise.” REPLAY here
Five Things to Do Before Starting a Title III Capital Raise:
1. Determine How Much Capital to Raise: Be specific about the amount you need.
2. Update Your Business Plan: has your team grown since you first created the plan? Keep track of early investors, including those Friends & Family: they will need to be noted in the future during a raise.
3. Review of Corporate Documents
4. Structure the Offering – Breakaway Funding can help you
5. Meet the Regulation CF Disclosure Requirements
Once you go through those steps, becoming acquainted with your crowdfunding portal will take a little time, but proper due diligence goes a long way when the time is right to start seeking investors.
To learn more about the different ways to raise capital, visit our video library in our membership section and sign up today.