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February 12, 2020

What is Regulation CF?

 

For over 80 years, private companies could only raise capital (i.e. money) from accredited investors. Accredited investors historically have comprised a small percentage of Americans. This all changed, however, when President Obama signed a piece of legislation called the JOBS Act on April 5th, 2012. The JOBS Act allows entrepreneurs to go to the crowd and publicly solicit or advertise their capital raises. Four years after the JOBS Act was signed, Title III (aka Regulation CF) of the JOBS Act went into effect, allowing private early-stage companies to raise money from all Americans.

 

Regulation CF (Reg CF), is an offering type that allows private companies to raise up to $1.07 million from Americans. Like a Kickstarter campaign, Reg CF allows companies to solicit funding online from their earliest adopters. Instead of rewards like a sticker, piece of clothing, or a product, investors in Reg CF companies receive securities, typically equity, in the startups they support and have the opportunity to back more than just a product, but also in a business. Because of the lower capital raise limit, companies raising under Reg CF tend to be earlier stage companies, and have lower valuations. 

 

Reg CF offerings, however, limit the amount investors can invest in Reg CF startups. To calculate your limit, first choose either the lower between your net income or net worth. If the lower number is over $107,000 you are allowed to invest 10% of it each year. Otherwise, investors may only invest 5%.

 

The KingsCrowd Advantage

With over 50 platforms like Republic, Wefunder, and SeedInvest, you can easily get overwhelmed with the small differences between each platform. Additionally, there are thousands of entrepreneurs hoping to get investors from across America to support their ideas and businesses. Accredited investor or not, KingsCrowd covers deal flow for both accredited and non-accredited investors. No matter who you are, we want to provide unbiased, institutional grade research and analytics for every company across all platforms. Signup for KingsCrowd here to access the best analysis and research on the online private markets.


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About: Francis vu

An investment professional with a background in private equity and venture capital having spent time conducting investments at VU Venture Partners and Pacific Oak LLC with a finance and management degree from Tulane University.

View Francis vu's articles

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