Inside The Kore #34
The 34th issue of Inside The Kore is out!
Have a good read.
Approaching the 11th Anniversary of the JOBS Act
Eleven years ago, the Jumpstart Our Business Startups (JOBS) Act was signed into law in a White House Rose Garden ceremony. Looking back on this landmark legislation, its impact has been far-reaching. From increased access to capital for small businesses to the rise of new markets for investment opportunities, the JOBS Act has reshaped how companies raise funds and spur economic growth. In 2022, $150.9 B was raising through Regulations A+, CF, and D, showcasing the tremendous power of these regulations for companies. As we mark the 11th anniversary of this game-changing law, let’s look at what it has accomplished and how it is (still) changing the capital formation landscape.
David Weild: The Father of the JOBS Act
David Weild IV is a veteran Wall Street executive and advisor to U.S. and international capital markets. He has become well known as a champion of small business as the “Father of the JOBS Act”. Signed into law by President Barack Obama in April 2012, the Jumpstart Our Business Startups (JOBS) Act has opened up access to capital markets, giving small businesses and startups the ability to raise money from a much larger pool of investors. Wield has remarked that this was not a political action; it was signed in “an incredibly bipartisan fashion, which is really a departure from what we’ve generally seen.?It actually increases economic activity . It’s good for poor people, good for rich people. And it adds to the US Treasury”.
As such, Weild is seen as a leading figure in the JOBS Act movement, inspiring the startup community to break down barriers and build the future. He has helped make it easier for companies to become public, empowering a new generation of entrepreneurs looking to start or grow their businesses. Furthermore, Weild’s efforts have allowed more investors to participate in capital markets.
Benefitting from the JOBS Act
At the inception of the JOBS Act in 2012, non-accredited investors were only allowed to invest up to $2,000 or 5% of their net worth per year. This was designed to protect non-accredited investors from taking on too much risk by investing in startups, as these investments would likely be high risk and high reward. Since then, the JOBS Act has expanded to allow non-accredited investors to invest up to 10% of their net worth or $107,000 per year in startups and private placements.??
For companies they were initially allowed to raise:
These numbers have grown significantly since 2012, with:
These rules have opened the door for startups to access large amounts of capital that otherwise may not have been available to them. This has allowed more companies to grow, innovate and create jobs in the U.S.
How Much has Been Raised with JOBS Act Regulations?
The JOBS Act regulations have?revolutionized how capital is raised ?by companies and how investors access new markets. According to?Crowdfund Insider , companies have raised:
Since its formation in 2012, the JOBS Act has opened up a variety of avenues for entrepreneurs to access capital. The exempt offering ecosystem has allowed innovators to raise large sums of money with relatively fewer requirements than a traditional public offering, while still requiring compliance and offering investors protection. This has enabled companies to stay in business and grow, allowing the US economy to remain competitive on the global stage.
Insights from Industry Leaders
Expanding the discussion about capital formation, KoreConX launched its podcast series,?KoreTalkX ?in April 2022. Through this platform, we’ve hosted many thought leaders and experts to share their insights on capital-raising strategies and compliance regulations. Guests have included renowned thought leaders including David Weild, Jason Fishman, Shari Noonan, Joel Steinmetz, Jonny Price, Douglas Ruark, Sara Hanks, and many others. Each of these episodes has explored topics in-depth to provide entrepreneurs with the tools they need to be successful when raising capital from investors.
Reforms to RegD
With Regulation D (RegD) offerings, companies are exempt from registering securities with the SEC. Under RegD, companies can raise capital from accredited investors (and a limited number of nonaccredited investors in some cases) to support the growth of their business. This has become a popular method for private companies to raise capital, and can often be a starting point for larger capital raises under Regulation CF or Regulation A+. This popularity and the minimal disclosure requirements of RegD have?prompted SEC Commissioner Caroline A. Crenshaw to propose changes to RegD disclosure requirements ?in January. Let’s see about these reforms to RegD.
Current Regulations Under RegD
The objective of RegD was to enable small and medium-sized businesses to seek capital-raising opportunities, without the cost-prohibitive disclosure requirements of a public offering. Under current regulation, companies may make private offerings of securities without having to register with the SEC, provided that they comply with certain disclosure requirements. These include filing Form D (which provides information about a company’s executives and its financial condition) and providing investors with a private placement memorandum outlining the terms of the offering. However, as this method of capital raising has been leveraged by multi-billion-dollar companies for whom it was not originally intended, the SEC is looking to update the disclosure requirements.
Commissioner Crenshaw’s Proposed Reforms
Commissioner Crenshaw has proposed a two-tiered framework, similar to Regulation A (RegA) which also provides an exemption from SEC registration requirements. Under the proposed reforms, companies offering securities through RegD would be required to provide more disclosure than is currently required, with the burden of disclosure increasing based on company size. Smaller companies (up to a threshold) would only need to provide basic information about their business operations such as management, operational updates, and financial statements. Larger companies (over the threshold) would be required to provide additional, heightened financial disclosures similar to those that are required under an S-1 filing.?
This reform could have far-reaching implications for small and medium businesses that wish to access capital markets and would largely depend on where the threshold is set. It remains to be seen whether these proposed reforms will move forward, but it’s clear that Commissioner Crenshaw is interested in modernizing and streamlining the process of raising capital.??
Effects of These Changes
The SEC’s proposed reforms would require issuers to provide more extensive disclosure and adhere to certain standards that are typically only associated with public offerings. This could potentially be a costly endeavor, as it would involve additional filing fees, legal expenses, and accounting costs.
The proposed reforms could also limit the ability of small businesses to access capital through Regulation D, as the costs associated with meeting the new requirements may be too high for some companies. For example, smaller companies may find it difficult to pay for the necessary accounting and legal fees, or they may not be able to generate enough interest from investors due to the higher thresholds that must be met to qualify for RegD. Small start-ups trying to raise only $250,000, these companies may not have the money to prepare the audited financials and Form 1A level disclosures.
领英推荐
The SEC’s proposed reforms of Regulation D are a step in the right direction toward protecting investors and ensuring that issuers adhere to certain standards. However, these reforms could potentially be harmful to small businesses seeking to raise capital through RegD offerings. The SEC needs to consider the potential effects of its proposed reforms and ensure that they are not overly burdensome on companies whose access to capital is already limited.
7 Things You Need to Raise Capital Online in 2023
Raising capital online can be a great way to a vast pool of potential investors. With the JOBS Act exemptions and many online funding portals available, it’s easier than ever to get started. Here are 7 Things You Need to Raise Capital Online in 2023.
1. Know Your Options
From?Regulation D ?506(c) offerings to?RegCF ?and?RegA+ ?offerings, it’s important to understand the differences between them. Each option has different requirements for time, cost, and resources. Plan accordingly for whatever option you choose by considering the trade-offs. Many issuers start with a RegD, then move on to a RegCF, and then a RegA+ because of the costs and compliance efforts required with each exemption.
2. Plan for a Higher Cost of Capital
Raising capital?can be expensive . Especially when doing so online, you should plan on paying more than you usually would because of the additional costs associated with marketing, platform fees for using a crowdfunding platform, etc. These costs, along with fees for broker-dealers and legal counsel, can add up quickly, but understanding the potential costs will help you to plan accordingly. While raising capital online will cost more than a brokered or VC deal, you will retain greater ownership and control and suffer from less dilution, which may be a valuable tradeoff.
3. Find the Best Online Capital-Raising Platform
Before you embark on your journey to raise capital online, you need to find the right platform for your needs. You will want to make sure that you are working with the best platform possible. The first step is to do your research and find out which platform suits you best. You should look into the fees each platform charges, their customer service ratings, and whether or not they have any special features such as automated investing tools or portfolios with pre-set risk profiles.
Be wary of platforms that promise unrealistic returns or make promises about how easy it will be to raise capital in a short amount of time. Seek out platforms that have built up a good reputation and are transparent with their fees and services. Platforms do not raise money for you. Be sure to have a clear strategy in place before you launch your capital-raising campaign, and do not use a platform that promises too much. You can explore the list of FINRA-regulated funding platforms?here .
4. You’re Responsible for Marketing
You’ll need to craft an effective message and have the resources available to get it out there – whether that’s through social media, email campaigns, print ads, or other forms of advertising.?When you sign up for a capital raising platform, they do not help you with marketing or getting investors. This is left up to your organization or you can hire a marketing firm that is experienced in marketing for online capital raises. Ensure you know your target market and audience so that your message resonates with the right people who will invest in your cause or project. Researching trends in the current market can help you refine your strategy over time as well. Focus on building relationships with potential investors by providing value upfront before asking them for anything monetary related – this can go far towards building trust and credibility between both parties when?marketing for your capital raise .
5. Launch with an Announcement and Target Multiple Investors
Announce the closing of your last smaller raise and its success when launching your next round. You can create a sense of urgency that will attract investors and help drive interest in your offering. This proven strategy can be rinsed and repeated as often as needed (though it can be overdone, and your audience will eventually catch on that this isn’t really the last chance to invest). Another way to maximize your chances for success when raising capital online is to target multiple investor types. While it’s important to target self-directed investors online, you can also retain marketing partners to reach out to family offices and institutional investors. By targeting multiple investor types simultaneously, you’ll improve your chances of raising more capital.
6. Focus on Marketing and Platforms
It is essential to have a well-structured marketing plan. That will help you reach your target audience and create awareness of your offering. It’s also important to focus on choosing the right platform for your capital-raising efforts. Consider?your capital-raising goals, the platform you plan to use to meet those goals, and the availability of resources to help you achieve success. Will your campaign primarily use affinity marketing? Or will you utilize tools such as advertising, email campaigns, and social media?
7. Get a Valuation Report and a Securities Attorney
During the process of raising capital online, understand the value of your assets and make sure that you are compliant with security laws. A 3rd-party valuation report can give you a better understanding of your company’s worth and help inform investors about its potential. These reports are available from many reputable firms, and retaining one can help you to make a more convincing case for the worth of your company. It is also essential to hire a securities attorney to ensure you comply with JOBS Act exemptions. Without a lawyer experienced in securities law on your side, you could be risking legal violations and hefty fines.
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1 年Thanks for sharing.