Over the last five years, we have seen rapid growth and evolution of crowdfunding on platforms like Kickstarter and Indiegogo. What started as an edgy and trendy way to raise money and gain pre-orders for a new product, has grown to a highly competitive and over-saturated marketplace of new products and projects vying for attention and dollars.
Many of us who follow start-up finance and crowdfunding in particular have had a keen eye on an emerging opportunity within this space: equity crowdfunding. In 2012, the JOBS Act paved the way for the Securities and Exchange Commission (SEC) to modernize existing regulations and open the doors to a new form of business fundraising. The main theory behind this change is that equity crowdfunding will allow individuals to reserve small amounts of equity or stock in a company using online platforms that follow the same principles of mainstream crowdfunding, instead of on a traditional stock exchange (i.e. NASDAQ).
During the time period between the Securities Act of 1933 and the 2012 JOBS Act, little had changed to allow an average person to invest in early-stage companies. These historic regulations require private investors to become accredited, a process that must demonstrate a high net worth or income. Accredited investors are also limited by traditional investment rules. For example, there are few options available for exiting or liquidating early-stage investments before the sale of the business or a traditional Initial Public Offering (IPO) is completed.
All of this has changed due to the March, 2015 release of new equity crowdfunding regulations under a provision by the SEC, called Regulation A+ or Reg A+. This regulatory shift was made possible by the 2012 JOBS Act.
Resources on Regulation A+
For those of us who are not experts in securities law (I’m certainly not), here are some resources you can use to learn more about Regulation A+. While you read, keep in mind that Reg A+ is still very new. At the time these resources were written, Regulation A+ had not yet been tested, so there will be more to learn and more information available in the coming months.
- Everything you need to know about Reg A+ – Blog article
- Capital Raising Using Regulation A+ – Online Continuing Legal Education seminar
- Start Engine – Equity crowdfunding platform]
On October 26, 2015, the 4th Annual Crowdfunding Convention & Bootcamp in Las Vegas will focus specifically on Regulation A+. This will be one of the first conferences addressing these new investment regulations. I will be attending, as well as speaking on a panel regarding the subject of marketing and communications in crowdfunding.
An Emerging Opportunity for Advanced Marketing Strategies
Perhaps you are wondering why the owner of an Internet marketing agency is so excited about Reg A+ and willing to travel across the country to attend and speak at a conference dedicated to this form of capital raising. Well, I’m happy to share why:
This new funding option crosses two areas I am passionate about – entrepreneurship and Internet marketing. A thriving entrepreneurial environment needs a range of options to obtain capital. Equity crowdfunding has the potential to fill a significant need for businesses outside of accredited investors, traditional crowdfunding, and loan options. Because Reg A+ will employ online platforms that are based on similar models as Kickstarter and Indiegogo, many of the same promotional strategies used to raise awareness for campaigns and encourage investor participation will apply.
JB Media Group has been involved in several Kickstarter campaigns, helping businesses in our area raise over $200,000. We began consulting and managing Kickstarter campaigns out of the desire to support the expansion of businesses through the launch of new products. Now, with the emerging opportunities brought forth by equity crowdfunding, marketing professionals can apply skills and experience in PR, social media, and digital advertising to facilitate a strong launch strategy with real impact, while expanding the sources of capital to small and mid-sized businesses. This also poses some interesting challenges due to the legalities of issuing stock and because this is still uncharted territory for those involved. As someone who is always curious about emerging trends and intrigued by a new challenge, I am particularly interested in how Reg A+ will evolve in the next 12 – 18 months.
“Testing the Waters” with Appalachian Mountain Brewery
Boone, NC based Appalachian Mountain Brewery (AMB) is preparing for one of the first “testing the waters” Regulation A+ equity crowdfunding campaigns. “Testing the waters” is the term used for gauging stake in a future Regulation A+ campaign, by allowing investors to pledge a non-binding indication of interest. Currently, our companies are in conversation about how JB Media Group can support the marketing and communications needed to effectively complete “testing the waters.” We are very excited about the opportunity to work with AMB – their campaign team provides strong support in the area of securities law, and their company has a strong mission-driven business model, with community based philanthropy built into their expansion plans.
Evolution is one of our core values at JB Media Group, and personally, I am very excited to be involved with this emerging intersection of entrepreneurship and Internet marketing. Stay tuned to our blog to learn more about the marketing and campaign strategy aspects of Regulation A+ offerings as we share some insights from these events and projects.