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November 6, 2020

SEC Updates Crowdfunding Limits – News Roundup Nov. 2-6

If there were a Guinness World Record for the number of times people refreshed their browser windows, I bet this week would take it. While all eyes have been glued on the election, other things have still been happening! So let’s get you caught up on something that isn’t just red and blue all over the place.


The Business Buzz

The death knell of retail? Two major mall owners filed for bankruptcy over the weekend — Pennsylvania Real Estate Investment Trust (PREIT) and CBL & Associates Properties Inc. (CBL). Together, they own around 130 malls spread across the US. Many of these properties are known as B-class malls — meaning they bring in less profit per square foot than other, more optimally located malls. Both CBL and PREIT have been hit hard by the pandemic and then again by the wave of retail bankruptcies that were filed over the summer by mall staples like JCPenney and Payless. Neither mall owner is ready to fully call it quits though. CBL and PREIT are each looking to slash debt and restructure operations so that they can emerge on the other side of the pandemic still living.

There’s been a lot of discussion about the “death of retail” recently. And many are pointing to this wave of bankruptcies as evidence of COVID-19 speeding up a process that had already begun. There’s no doubt that e-commerce and direct-to-consumer business models are showing their strength right now. But not everyone is so sure that brick and mortar retail is on its deathbed. For a more nuanced perspective on the brick and mortar vs e-commerce debate, I recommend this article from Early Investing. It makes a good argument for why investors might not want to treat the retail issue in such black and white terms.

The mighty ant gets taken down a notch. Last week I wrote about the much-anticipated IPO from China-based Ant Group — which was expected to be the largest IPO to date. It looks like it will continue to be much-anticipated for a while longer. Ant Group’s IPO was suspended by both the Hong Kong and Shanghai exchanges on Tuesday, just two days before it was set to initially debut. The move comes after Ant Group leaders met with officials from the Chinese Securities Regulatory Commission. The meeting cast doubt on the company’s ability to meet legal requirements for its listing. New draft rules relating to online micro-lending — released on Monday — may also be affecting the company.

Ant Group has stated that it still intends to pursue an IPO — after it has handled any necessary regulatory or legal issues. Parent company Alibaba — which still holds strong stake in Ant Group — saw shares drop in both Asia and the US after news of the cancelled IPO was released. 


The Private Market

Crowdfunding is changing in 2021. The SEC announced this week that it has approved a handful of updates to Regulation Crowdfunding (Reg CF) and Regulation A+ (Reg A+) — all of which will take effect in early 2021.. And the most exciting change for startup investors like you and me is the new raise limit for Reg CF campaigns. Currently, a startup can raise a maximum of $1.07 million from crowdfunders in a given year. Starting early next year, that limit is increasing to $5 million! This is big news in startup investing because it will likely increase the number of companies who choose to pursue Reg CF campaigns. And that in turn provides everyday investors with more opportunities to find that next unicorn or create a startup portfolio that’s a mix of pre-seed, seed, and Series A companies. This year has already seen record amounts of money committed to startups at the Reg CF level. Just imagine what next year will be like when startups can go for $5 million instead of $1 million!

More platforms, more better. In addition to the increased deal flow that’s likely to result from the SEC’s changes, this week also saw three new startup investing platforms join the ecosystem.  

Funders USA is focused on tech-based startups — particularly ones that are developing AI or SaaS systems. It allows both debt and equity-based investing on its site. Currently, there are two live deals on Funders USA: Bullfrog AI Holdings — which wants to use AI to predict what medications will be best for people — and Virtual World Computing — which wants to help people monetize their personal data without sacrificing privacy.

InfraShares wants to bring crowdfunding to infrastructure projects and public-private partnerships — with a focus on Smart City infrastructure. The platform applies a 14-point risk evaluation to every raise application it receives. Currently there is one active offering on InfraShares: Shadow Accelerator, a startup accelerator program for companies in the multifamily tech market.

Title3Funds specializes in Reg CF campaigns — as opposed to Reg A+ or Reg D raises. It has also partnered with various accelerator programs and VC firms to develop a pipeline of startups. Title3Funds has one active deal right now: electric bike company Monday Motorbikes (note: you have to be logged in to see live offerings from Title3Funds).


The Fun Stuff

Ever wonder what would happen if the Wild West met a Danish Orchestra? Well, wonder no more. The Danish National Symphony Orchestra has an amazing performance of the theme from The Good, the Bad and the Ugly — complete with a vocal rendition of the classic “Wahh, wah, wahh” opening (you’ll know what I mean when you watch the video). In fact, they did a whole Wild West series — including the themes of A Fistful of Dollars and For a Few Dollars More. The renditions are pretty flawless. And it’s surprisingly fun to watch a bunch of professional musicians have fun while playing twangy mouth harps and clapping wooden slats together. 


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About: Aryelle Young

Aryelle Young is a published writer and editor with experience across industries. She has worked with an independent publishing company and as a proposal writer for a government contractor. Her original work has also been published in various journals and one short story collection. At KingsCrowd, she strives to provide insightful and actionable content for all readers. Aryelle graduated with a Creative Writing degree from George Mason University.

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