Equity Crowdfunding (Reg CF) Guidance

Equity crowdfunding is a form of conservative crowdfunding in which a business offers securities, such as ownership stakes, to many people through an online process. Unlike a donation or rewards campaign, the people who take part are investors, not just supporters or customers.

Reg CF is a set of SEC rules that allows certain companies to make these offers to the general public under specific conditions. Offerings must run through an SEC-registered funding portal or broker-dealer, and the company must make required disclosures, including financial information.

Because securities are involved, investing is risky and illiquid, and investors may lose money. Rules, limits and eligibility change over time, so the SEC and a securities attorney are the right places to confirm current requirements for any specific situation.

Businesses have traditionally raised money from investors through private placements, loans, bank financing, or personal networks of friends, family and angel investors. These routes often depend on existing relationships and can involve direct negotiation with each investor.

Other exemptions under securities law exist alongside Reg CF, and each has its own conditions, such as who may invest, how the offering may be promoted, and what must be filed. A securities attorney can explain how these options differ in general terms.

Many founders approach a regulated raise by first learning the rules, preparing the required financial statements, working with counsel, and choosing a registered portal. Others decide a different path, such as a donation-based or rewards-based campaign, fits their goals better.

The right independent fundraising pro may help you understand the basics of Reg CF, the roles of the portal, the company and counsel, and what a typical timeline of preparation looks like. This is a possibility, not a promise, and no provider can guarantee a raise will succeed.

A first conversation is usually about your business, your goals, and whether equity crowdfunding is even a fit. A good pro will point you toward a securities attorney for legal questions and an accountant or preparer for financial statements, and will not offer or solicit investments themselves.

Helpful questions to ask include: What is your role compared to the attorney and the portal? Which parts of the process do you not handle? How do you approach honest, accurate disclosures? How do you communicate about risk? Remember that campaigns must be truthful, and misleading investors can have serious legal consequences.