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5 PROBLEMS WITH TITLE III EQUITY CROWDFUNDING

crowd_gears.jpg

The Title 3 JOBS Act went live this week, and investors no longer have to be accredited to make equity investments. Now, the multitudes ordinary “retail investors” can contribute capital to your business.

To many, Title 3 may seem like a win-win evolution of democratized fundraising. But some equity crowdfunding platforms are either playing it cautious or staying away.

Understanding each platform’s position on Title 3 will help you know where to go when you’re developing a fundraising strategy. Below is a list of equity platforms and the current stance on Title 3, divided into 3 categories:

  • Hot. The platform already supports Title 3, non-accredited investors.
  • Lukewarm. The platform does not yet support Title 3 but there’s reason to believe it may in the future.
  • Cold. The platform or its leaders has openly come out against Title 3 fundraising.

 Use this list when shopping for platforms: 

Post-TITLE-3 List of Equity Crowdfunding Platforms

Crowdfunding site and description

Position on Title 3 and explanation

Where to apply

AngelList — U.S. website for startups, angel investors, and job-seekers looking to work at startups. Started as a specialist for Tech Start-ups, but has since expanded.

Lukewarm. The CEO actually participated in the formation of the legislation.

Apply

1000 Angels – Touted as the “world’s largest digital-first, invitation-only investor network.”

ColdCEO states that there are “too many strings are attached” and the costs are too high.

Apply

CircleUp — Accredited investor platform for mainly high-growth companies. 

Cold. CEO stated that the “ . . . title’s regulations create too many burdens for entrepreneurs and adverse selection for investors.”

Apply

Crowdfunder — Focuses mainly on Seed and Series A funding. Crowdfunder advisers were active with Congress and the SEC on writing some of the equity legislation. 

Lukewarm. CEO helped write JOBS legislation, but has not yet embraced it on the platform.  

Apply

Crudefunders – Exclusively for petroleum-based investment. 

Hot. From the site: “become a Texas oil baron for as little as $1,000!”

Apply

Early Shares — Real estate deals only.

Lukewarm. By sticking with only real estate, Early Shares seems like a natural fit for smaller investments from non-accredited investors.

Apply

Equity Net — Another early platform, feature-rich EquityNet was established in 2005. The platform has lots of features for entrepreneurs, such as business plan creation tools. Not a registered broker-dealer. 

HotThe site reports that it has had more than 8,400 companies that could qualify.

Apply

Fundable — Fee-based platform that is a hybrid of reward and equity-based campaigns for small businesses. 

LukewarmFor now, only available to accredited investors. But Fundable’s general appeal seems like a natural fit for Title 3.

Apply

Offerboard – So far, only for companies raising $2-200MM. Pairs investors with advisors on a proprietary technology platform.

Lukewarm. According to the site FAQ, Offerboard seems to favor a wait-and-see approach. 

Apply

SeedInvest – Average investment of $500,000, usually from high-net-worth individuals, family offices and venture capital firms.

Hot. But fundraisers can decide to accept only accredited. Investments are as little as $100.

Apply

Seedrs — European-focused, but came to United States after the 2015 passing of Title 2. Offers three types of campaigns for investment - equity, funds and convertible campaigns.

Cold. CEO called Title 3 “not workable in its current form.”

Apply

truCrowd – Provides intrastrate crowdfunding options for TX, IL, FL, MI or GA.

Hot. All investors. Received approval from FINRA for Title 3 offerings on May 17, 2016

Apply

venture.co – High-touch customer service options for entrepreneurs. Allows issuers innovative options for cap table management, offer assembly, etc.

Lukewarm. It’s uncertain how well the customer service options will scale to accommodate high volumes of Title 3 investors.

Apply

WeFunder.com — One of the earliest older crowdfunders, WeFunder has an expansive strong base of established investors. 

Hot. WeFunder is one of the more proactive Title 3 crowdfunding platforms. 

Apply

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Stephen Loy