SEC Issues Progress Report on United States Title III Equity Crowdfunding Growth Rate

Approximately 163 separate offerings were filed by 156 issuers, seeking a total of approximately $18 million

By Robert Hoskins

Washington, DC – The SEC just released a white paper entitled, U.S. securities-based crowdfunding under Title III of the JOBS Act, which analyzes crowdfunded offerings during the first six months following May 16, 2016 when Title III, Regulation Crowdfunding become official. The SEC’s white paper, which was prepared for Scott Bauguess, the Acting Chief Economist and Acting Director of the Division of Economic and Risk Analysis (DERA), noted that the majority equity crowdfunding offerings to date have not utilized Regulation D as much as predicted.

Top 20 Title III Equity Crowdfunding Sites in U.S.

The white paper does go into great detail about five largest Title III crowdfunding portals based on the number of offerings, which accounted for 71% of the offerings launched during 2016.  The five largest Title III crowdfunding sites  also accounted for 64% of the total amount of funds raised. And while more 20 crowdfunding sites were listed, most of the offering activity was limited to 25% of active platforms in the Title III crowdfunding marketplace. And, if you ran the numbers for completed offerings, you would see that the top five largest intermediaries accounted for more than 90% of the market share.

The table below low shows the list of the Top Performing Title III Crowdfunding Portals sorted on the number of initiated offerings and then by the target amounts of the initiated offerings, excluding offerings withdrawn as of December 31, 2016.

Top 20 Title III Equity Crowdfunding Sites Ranked by Number of Offerings

 

Most Successful Types of Title III Equity Crowdfunding Campaigns

Many people want to know what the types of Title III crowdfunding campaigns were the most successful. Preferred Equity led the pack at 36%, followed bySimple Agreements for Future Equity at 26%, Debt at 20%, Units at 7%, Convertible Notes at 6% and Miscellaneous accounted for the remaining 5%, which included Revenue Sharing and Membership / LLC Interests.

Distribution of Title III Equity Crowdfunding Offerings

 

Top States for Launching Title III Equity Crowdfunding Campaigns

Another interesting way to look at growing crowdfunding industry is to examine what states launched the most successful Title III Equity Crowdfunding Campaigns.  In the table below you can see that California/Silicon Valley launched the most Title III crowdfunding campaigns, followed closely by Texas/Silicon Hills at 19%, New York at 14%, Massachusetts and Illinois tying at 9%, Delaware, Florida, New Jersey, Oregon, and Pennsylvania bringing up the back to the pack, all with 5%.

States with the Most Title III Equity Crowdfunding Campaigns

 

How Many Reg. D and Title IV, Reg. A+ Crowdfunding Offerings Result?

Because many industry experts have stated their concerns that the SEC’s decision to severely restrict the general solicitation guidelines with regards to advertising their crowdfunding deals to the masses of non-accredited investors, the white paper also took a close look at how many Title III Regulation Crowdfunding Campaigns had previously or subsequently conducted an offering under Regulation D or Regulation A.

As shown in the table below, as of January 15, 2017, approximately 15% of offerings initiated during 2016 (excluding withdrawn offerings) were by issuers that have also reported offerings under Regulation D either before or after the initial crowdfunding filing. And, approximately 3% of issuers have issued Regulation A+ filings as of January 15, 2017.

Among crowdfunding issuers, approximately 12.9% of offerings were by issuers that had filed the first Form D notice prior to the first crowdfunding filing and approximately 2.5% of offerings involved issuers that had filed a Form D notice after the first crowdfunding filing. For about 8.6% of offerings, excluding withdrawn crowdfunding offerings, a Form D filing was made within one calendar year before or after the initial crowdfunding filing. Consistent with their young age, the SEC determined that the majority of the crowdfunding issuers were more likely to be new startups rather than “fallen angels.”

Overall, these results suggest that crowdfunding is attracting issuers that have not extensively used other private offering exemptions, such as Regulation D, which is otherwise a very popular private offering exemption among similarly sized issuers as those initially availing themselves of the Crowdfunding market. The initial evidence is points to the fact that Title III, Regulation Crowdfunding is indeed providing a new source of capital for entrepreneurial and small businesses that may not otherwise have had access to capital through alternative capital raising channels.

Form D and Title IV, Reg A+ Equity Crowdfunding Offerings

 

The white paper also made a point of covering the following facts and figures.:

• There were 163 separate offerings by 156 issuers, seeking a total of approximately $18 million, excluding withdrawn offerings. The median offering amount was $53,000 and the average offering amount was approximately $110,000. However, almost all of the offerings accepted over-subscriptions up to a higher amount (typically close to $1 million) for a total amount of approximately $101 million.
• As of January 15, 2017, approximately $10 million in proceeds was raised in 33 offerings by issuers filing a Form C-U. The median amount raised in these offerings was $171,000 and the average amount raised was approximately $303,000.
• For offerings initiated in 2016, were withdrawn by issuers or associated with an intermediary whose FINRA membership was terminated and funding portal registration withdrawn. These offerings sought a total of approximately $2.3 million (approximately $19.5 million if over-subscriptions are included).
• Most of the offerings solicited in all states.
• The most popular type of security was equity, followed by “simple agreements for future equity” and debt.
• The most popular state of incorporation for issuers was Delaware and the most popular principal place of business for issuers was California.
• The median issuer had under $50,000 in assets, under $5,000 in cash, $10,000 in debt, no revenues, and three employees. Approximately 40% of the issuers reported positive revenue and approximately 9% of the issuers reported a net profit in the most recent fiscal year. Among the issuers that reported non-zero assets in the prior fiscal year, the median growth rate was approximately 15%.
• 21 intermediaries, including 13 funding portals and 8 broker-dealers, were involved in the offerings. As of December 31, 2016, funding portals have registered with the SEC and FINRA and one funding portal had its FINRA membership terminated and withdrew its SEC registration. The median intermediary percentage fee was 5%, and intermediaries took a financial interest in the issuer in approximately 16% of the offerings.

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Robert Hoskins
(512) 627-6622
@Crowdfunding_PR

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Mr. Robert Hoskins is a seasoned marketing veteran with a proven track record of helping entrepreneurs, startups, small businesses as well as Fortune 500 corporations launch successful marketing communications campaigns to gain market traction for a wide variety of products and services.

On a regular basis, Mr. Hoskins consults with crowdfunding campaign managers as well as crowdfunding sites, portals and platforms to deliver successful crowdfunding marketing campaigns.

Google search “Robert Hoskins Crowdfunding” to see why Mr. Hoskins is considered one of the industry’s foremost crowdfunding experts that has amassed a huge social media following, which is dedicated to supporting donation-, rewards- and equity-based crowdfunding campaigns.

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Why Every University and College Should Develop a Rewards-based or Equity-Based Crowdfunding Ecosystem

Crowdfunding platforms can be used to support research & development, transfer technology, protect IP, build co-working spaces and finance incubators and accelerators to launch new startups

 By Robert Hoskins

 Austin, Texas – The purpose of this equity crowdfunding article is to encourage universities and colleges to begin thinking about how schools and students might benefit from:

• Building a Rewards-based and/or Equity-based Crowdfunding Ecosystem;
• Providing Easy Access to Seed Investment Capital with Crowdfunding;
• Generating More Revenue to Support Co-Working Spaces and Startups;
• Using Equity Crowdfunding Sites to Finance Incubators and Accelerators;
• Taking Advantage of Investor Syndicates that are Seeking Better Deal Flow;
• Splitting Revenue from Incubator and Accelerator Mentors Consulting Fees;
• Streamlining Technology Transfer Offices (TTOs);
• Cross-Pollinating College Education with Real World Startups; and
• Learning to Build Better Alumni and Local Community Relationships

The Need to Build a Crowdfunding Ecosystem

There is a new generation of “Millennials” that do not want to go to college due to the poor economy and because they do not want to start their life as young adults by incurring $50,000 or more in college loan debt. And there is a growing concern for many students that there may not be a job waiting for them when they finally graduate. 

Read more:  What is Crowdfunding?

But what if there was a way to attract more students by convincing them that they could work their way through college by researching, planning and then launching their own business while earning their college degree? This would allow some certainty about their career path and teach students how to put a lot more money in their pockets than working for a large corporation that will stick them in a cubicle for the rest of their life.

Entrepreneurship Centers

For this reason, “Entrepreneurship Centers” are becoming a huge draw for students who do not want to work for a living, but instead want to live for working. That means learning how to build new startups from the ground up.  Entrepreneurship Centers usually start with a co-working space, then adds a business incubator with mentors to guide students through the startup process and when budget permits, accelerators are created to help students raise money from angel investors, accredited investors and sometimes venture capitalists.

Co-Working Spaces for Startup Companies

The biggest challenge for incubators and accelerators are the costs associated with building a 25,000 sq. ft. co-working space, paying mentors salaries and finding experienced executives with great track records that are willing to share their wisdom and industry experience with students. There is also resistance from departing from the “old school” way of transferring technology from a university Research & Development laboratory, protecting the intellectual property and then utilizing a licensing or royalty revenue model to realize short-term deals to provide a revenue for the college or university. 

JOBS Act: Nationwide Equity Crowdfunding

Enter the 2012 JOBS Act, General Solicitation and a new Equity Crowdfunding alternative financing tool that can help startups raise seed investment capital to startup new businesses. While the SEC and NASAA seems hell bent on preventing the national guidelines from ever being released (they are three years past the official deadline mandated by President and the United States Congress), approximately 14 states such as Texas, Michigan, and Georgia have passed their own Intrastate Equity Crowdfunding Exemptions. Add to that another 15 states have a Crowdfunding Exemption in progress.

Map of United States that have approved Intrastate Equity Crowdfunding Exemptions

Source: CrowdfundingLegalHub.com

Intrastate Equity Crowdfunding Exemption

In states where intrastate equity crowdfunding is legal, any trade school, college or university can build an equity crowdfunding platform and use it to begin fundraising campaigns to raise money, not only from Angel Investors and Accredited Investors, but also from the general public who are non-accredited investors.

Read more: What is an Intrastate Equity Crowdfunding Exemption?

This means anyone can take a brilliant idea, create a business plan and investor deck to support the business case, build an online equity crowdfunding profile and then use marketing campaigns to advertise the deal to millions of potential investors. Like any e-commerce site, Investors can then visit the equity crowdfunding sites to shop for deals by minimum investment amount, by products or services or by vertical business segment to find deals they want to invest in.

This means that a college or university can build an equity crowdfunding site and use it to raise money for every one of its R&D programs and streamline the entire technology transfer process so that promising technology can be transformed into startups businesses. The school collects a certain percentage from each crowdfunding campaign called a platform commission fee. For a $1 million raise and 10% platform commission fee, a college could collect a $100,000 fee from each campaign. This money could be used to fund co-working spaces, incubators, accelerators and Entrepreneurship Centers.

Creating Equity Crowdfunding Investment Syndicates

By the SEC’s securities law, a crowdfunding platform’s management team or employees cannot invest in equity campaign hosted on its own site unless they are registered broker dealer with the SEC. But a popular trend that is growing is building a college or university equity crowdfunding investment syndicate. An investment syndicate is usually led by one or more Super Angel Investors, who are seasoned veterans that have been investing in startups for 20 to 30 years and completely understanding the process of vetting deals with due diligence and understand the real risks of investing in startup companies.

Novice accredited investors with little investment experience join the investment syndicate so that they can follow or invest along side the Super Angel Investors. In addition, where it is legal, investment syndicates will pool a large pool of non-accredited investors together, who make small investments, into a single LLC and then invest the group’s money similar to how a venture capitalist invests money on the behalf of others.

Adopting an Equity Crowdfunding Ecosystem

For colleges and universities that adopt an equity crowdfunding business model might, it might completely change the way a school recruits, raises money, builds relationships with alumni and earns revenue by seeking long-term equity stakes in their students startups versus short-term licensing and royalty agreements.

Read More:  Top 100 Crowdfunding Sites in the United States

Launching an equity crowdfunding platform would not just increase a school’s earning potential, but they might dramatically change the manner in which that Millennials are taught. Instead of just course work, students would be taught at an early age to begin to engage with the world around them and plot a course for their own future destiny rather than relying on fate. Some Millennials might reject the idea of going to college, but the lure of becoming a successful entrepreneur and launching their own business while earning a college education has the potential to create one of the most vibrant and thriving economies the world has ever seen.

Even students that do not start up their own companies have an outstanding chance to benefit from the equity crowdfunding business model. All students seek a way to get some type of real world work experience usually by working as free or highly underpaid interns. Imagine the learning benefits that student would receive when applying their desired major’s education such as business administration, finance, legal or marketing to the intense equity crowdfunding process of launching a startup company.

Instead of adding a bullet point for working a menial job as a small cog in the corporate machine as an intern, students just might be fortunate enough to work on several successful crowdfunding campaigns that would highlight their professional expertise such as business planning, structuring equity finance deals marketing, PR, video production, and/or copy writing. And if the sweat equity pays off in equity crowdfunding shares, they might become extremely wealthy when that startup goes public a couple of years after they graduate. This is how many, many Silicon Valley millionaires got their start. They just did not have a term for the process, which is now branded as equity crowdfunding today.

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What is Crowdfunding?

Crowdfunding sites and platforms are a great way for Universities and Colleges to generate extra revenue and market their school’s brand name on a global basis

By Robert Hoskins

What is Crowdfunding?

Crowdfunding is not a new concept. It has been used for thousands of years to collect small sums of money from the masses to pay for some of the most well known works in the world such as the Statue of Liberty.

The JOBS Act made it legal to use e-commerce sites to build crowdfunding profiles to collect money online from investors and utilize general solicitation  (advertising/marketing/PR) to raise money from the masses for the first time in 80 years. Funding that can be used provide seed investment capital to startups and help existing businesses expand their operations.

What States Have Legalized Equity Crowdfunding?

At the federal level, the final Title III equity crowdfunding rules guidelines have been stalled by the SEC, but at the state level Texas, Michigan, Georgia and 13 other states have passed Intrastate Crowdfunding Exemption rules that allow startups and businesses to raise money by selling equity shares online to raise seed investment capital. Other large states including California, Illinois, and Pennsylvania have proposed legislation, which is working its way through the legislative process.

Map of U.S. States that have approved Intrastate Equity Crowdfunding Exemptions

                                                Source: CrowdfundingLegalHub.com

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FlashFunders Launches Leading No Fee Equity Crowdfunding Site to Fund Startups in the United States

No-Fee Platform Helps Connect Accredited Investors to Innovative Entrepreneurs, Startups and Businesses Seeking Investment Capital

By Robert Hoskins

Santa Monica, California – FlashFunders announced the launch of its no-fee, online equity funding platform at www.flashfunders.com.  FlashFunders (member FINRA/SIPC) was started by Europlay Capital Advisors, law firm Stubbs Alderton & Markiles, and co-founders Vincent Bradley and Brian Park, and was formed to help startups raise capital efficiently while also opening up access to startup investing for accredited investors.

Vincent Bradley, the co-founder and CEO of FlashFunders, tells us more about equity crowdfunding

FlashFunders’ platform helps entrepreneurs navigate complex SEC regulations and offsets costly legal fees, while giving accredited investors unprecedented access to startup investment opportunities. FlashFunders provides a turnkey solution for raising capital and a marketplace where entrepreneurs can connect directly with accredited investors across the globe.

FlashFunders ensures all investors are accredited and that all offerings are SEC-compliant and executed using FDIC-insured escrows — which are created and paid for by FlashFunders.

“We worked with FINRA over the past year to expand the scope of our broker-dealer license, allowing FlashFunders to operate an online equity funding platform in a regulated environment,” said Vincent Bradley, the co-founder of FlashFunders. “We felt it was critical to ensure our platform was compliant for both startups and investors. Online equity funding is in its infancy and seeing tremendous growth; by engaging with FINRA, we’re leading the way for how it should be done — creating an industry standard.”

“Approximately 97% of the 8.5 million accredited investors in the United States currently don’t partake in startup investing,” said Mark Dyne, the chairman and founder of Europlay, a seed and early-stage investor in technology companies, as well as former Skype seed investor and board member and founder and CEO of Sega Ozisoft, Virgin Interactive Entertainment, and many others. “This is largely because they don’t have access to early stage companies. Leveraging technology and decades of combined experience in finance, venture investing, securities law and startup operations, FlashFunders provides entrepreneurs and investors a secure, SEC-compliant user experience, with e-Signature technology and document management capabilities backed by a team of FINRA-registered representatives to help ensure successful offerings on the platform.”

“FlashFunders is designed to fundamentally alter the capital-raising process,” said Brian Park, co-founder of FlashFunders. “We provide startups with a compliant, efficient and no-fee online equity funding platform to develop their business plans, publicly market their offerings and collect funding from accredited investors —saving startups thousands of dollars in legal fees. At the same time, investors on FlashFunders can purchase shares directly in startups with no transaction fees or carried interest charges.

FlashFunders creates a safe and intuitive process that allows investors to view startup offerings and execute investments legally and properly in minutes using Flash Seed Preferred documents and e-Signature technology.

FlashFunders has created “Flash Seed Preferred,” a set of safe, balanced and transparent investment documents that have been customized to facilitate fundraising on the platform, further streamlining a process that would otherwise take months of road shows, multiple middlemen and tens of thousands of dollars in legal fees to execute.

“Unlike other equity funding portals, FlashFunders does not curate or try to pick winners, and investments are not made through LLCs or Special Purpose Vehicles,” said Scott Alderton, Managing Partner at Stubbs Alderton & Markiles, LLP. “FlashFunders provides a seamless end-to-end solution for startups raising capital with virtually no external cost, fees or investor carry. FlashFunders receives an ongoing right to invest a limited amount under the same terms as all other investors if a startup is successful in getting funded on the platform.” Stubbs Alderton & Markiles, LLP is one of southern California’s leading business law firms, with deep experience in providing legal services to companies including LinkedIn, Beats by Dre and Skype, among many others.

The announcement is the first phase of FlashFunders’ rollout. Additional enhancements to the user experience will be added over time along with new tools and technologies to increase functionality and scale. Offerings from startups will be incrementally uploaded by the site’s concierge service, which assigns a live team to guide entrepreneurs through the process.

“We are educating a new generation of investors and building a more efficient roadshow for startups,” said Vincent Bradley.

A registered broker-dealer, member FINRA/SIPC, FlashFunders provides a no-fee online equity funding platform for entrepreneurs to publicly market their offerings, collect funding from accredited investors and gain access to SEC-compliant legal documents and escrow accounts to create their offerings.

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New Texas Equity Crowdfunding Investment Syndicate Created to Help Unaccredited Investors Learn How to Follow Successful Private Equity Investors

 Join the Texas Equity Crowdfunding Syndicate™ to Follow Experienced Private Equity and Seed Capital Investors that Are Investing in Private Placement Memorandums (PPMs) Being Offered to Unaccredited Investors by Top Texas Equity Crowdfunding Sites

By Robert Hoskins

Austin, Texas – If you are new to the world of equity crowdfunding, then one of the safest ways to invest in new Texas startups is to join the Texas Equity Crowdfunding Syndicate™, which is a large group of unaccredited investors that follow the lead of experienced, seasoned and accredited equity investors that have been investing in private equity and seed investment deals for many years with a higher than average track record.  Join our crowdfunding investment syndicate by filling out the form at the bottom of this page. 

Texas Equity Crowdfunding Investment Syndicate Allows Unaccredited Investors to Follow Professional Investors

The Texas Equity Crowdfunding Syndicate follows the most prestigious accelerators and incubators in Texas that continuously shop for, discover, and curate deals from the best startups, entrepreneurs and inventors that are seeking seed investments and venture capital.

For the past 80 years, private equity  investments have been solicited behind closed doors through registered broker/dealers that were only allowed to market private equity deals to a small pool of accredited investors.

But now that the SEC has lifted the ban on General Solicitation, equity crowdfunding sites can now market private equity investment opportunities to more than 8.7 million accredited investors in the United States.  

And for Texas-based startups and businesses, the Texas State Securities Board (TSSB) has now legalized equity crowdfunding, which allows more than 20,000,000 Texas residents 18 years or older to invest up to $5,000 per deal in as many companies per year as they want.  That means every Texas business now has the ability to tap into more than $100 billion of Texas venture capital by issuing offers on Texas crowdfunding portals.

To get started and learn how to become a micro venture capitalist, simply fill out the form below and detail what type of crowdfunding investments you are interested in exploring.  All contact information will be kept extremely confidential, but will allow us to help issuers on various Texas crowdfunding sites and portals to send you valuable PPM investment deals for your review on new equity, debt and convertible note offerings.

This information will be delivered via highly targeted, double opt-in newsletters that will only deliver information on the precise information requested.

Hint: Don’t invest in any industry that you don’t fully understand

At any time, investors can change their investment interest categories or delete their name completely from our general solicitation marketing database if they get bombarded by opportunities that do not meet their specific investment objectives.

 

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