Tag Archives: Form C-U

SEC Issues Three-Year Research Study on Title III, Regulation Crowdfunding (Reg CF) Fundraising Campaigns

26 Jul

Leading Crowdfunding Industry Analyst Firm, Crowdfund Capital Advisors, States Now is the Time to Update the Regulation to Further Enable Capital Formation

Washington, DC – Recently the Securities and Exchange Commission (SEC) published a staff report on Regulation Crowdfunding (Reg CF), also known as Title III Crowdfunding.

The Commission, in the adopting rules, stated that the “staff will undertake to study and submit a research report to the Commission no later than three years following the effective date of Regulation Crowdfunding on the impact of the regulation on capital formation and investor protection.”

The report finds the size of market, while modest in comparison to the broader financial markets, is evolving and doing so without any material risk to investors. Crowdfund Capital Advisors (CCA) data and analysis were cited in 7 references throughout the report.

“The industry is evolving systematically and responsibly,” says CCA Principal Sherwood Neiss. “With the appropriate adjustments to the regulation we can further enable capital formation without risk to investors. The time is now for the SEC to act.”
Sherwood Neiss, Crowdfunding Capital Advisors, testifies before the SEC

Sherwood Neiss, Crowdfunding Capital Advisors, testifies at the SEC

The CCA data and references used by the SEC were attributed to analysis by CCA and published in VentureBeat as well as Crowdfund Insider. The data comes from CCA’s CCLEAR Database. CCLEAR is the leading Regulation Crowdfunding database that collects, cleans, aggregates and reports on all companies seeking funds via Regulation Crowdfunding as well as those doing parallel 506(c) offerings.

A 506(c) offering is an online accredited investor offering. A parallel offering allows an issuer to run two offerings side-by-side and group the accredited investors in one pool and the Reg CF investors in another. This type of offering is popular for issuers that seek to raise in excess of the $1.07M cap in Regulation Crowdfunding.

Issuers that seek to raise funds via Reg CF must file a Form C (a form filed by a company (issuer) with the SEC before starting to raise capital and discloses financial information for its current and prior fiscal years) as well as a Form C-U (a progress report that an issuer files that discloses total capital raised).

Data that the SEC does not collect in either of these disclosures includes information like industry, a breakdown on the cost of the offering, daily change in capital commitments, daily changes in investors and information on a company’s valuation.

CCLEAR collects all this missing data which allows for more detailed analysis of the market including which industries are most popular with the crowd, which regions of the country have the lowest/highest overall valuations, what industries the crowd is most interested in supporting, etc.

An entire section of the report titled “Cost to issuers of undertaking a crowdfunding offering” came directly from research CCA did with issuers successful with Regulation Crowdfunding.

A key finding from our research, which was highlighted in the report, was that “the total cost of creating a campaign page, issuer disclosures, film, and video, and hiring a marketing firm, a lawyer, and an accountant amounts to approximately 5.3% of the amount raised.”

This average was based on feedback from 81 issuers. “This amount is substantially less than what a typical issuer would incur in a Regulation D offering,” says CCA principal Sherwood Neiss “and is a key reason why more companies should be looking at Reg CF as an attractive pathway to raising funds.”

The report provides a detailed look at how Regulation Crowdfunding has performed through December, 2018. (For people interested in data through today’s date, you can find it on CCLEAR’s Daily Dashboard – see below for the latest data).

“Unlike opponents who said regulated crowdfunding would open the floodgates to fraud, we have yet to see fraud materialize,” says Neiss.

“This is because there are easier ways to defraud investors than to come up with an idea for a business, incorporate it under federal laws, convince a funding portal to list you, spend hundreds of hours and thousands of dollars trying to bring your friends, family and followers to the campaign page, and then hitting 100% of your funding target or the commitments get returned.

Add on top of this the hundreds of discerning eyes picking apart a campaign in the comments section. These types of ‘built-in investor protections don’t exist in other parts of the private capital markets.”

Multiple recommendations were included in the report on how to improve Regulation Crowdfunding. The SEC cited a US treasury Report entitled “A Financial System That Creates Economic Opportunities.”

The Report recommends:

  1. Allowing single-purpose crowdfunding vehicles advised by a registered investment adviser;
  2. Waiving certain crowdfunding offering limits for accredited investors;
  3. Amending certain crowdfunding investment limits by other investors;
  4. Modifying the Exchange Act’s Section 12(g) exemption;
  5. And increasing the limit on how much can be raised through crowdfunding from $1M to $5M.

CCA’s principals were interviewed and cited in the Treasury report. The Fed’s recommendations were a summary of CCA’s more detailed recommendations as requested.

“The industry is evolving systematically and responsibly,” ended Neiss. “With the appropriate adjustments to the regulation we can further enable capital formation without risk to investors. The time is now for the SEC to act.”

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Robert Hoskins, a seasoned Front Page PR veteran provides more than twenty-five years of external communications, media relations, digital social media and SEO skills to Front Page PR’s crowdfunding PR and media relations service portfolio.
Robert Hoskins
(512) 627-6622
@Crowdfunding_PR


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 PR” 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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