regulation crowdfunding maximum investment: Today, the Securities and Exchange Commission (SEC) announced a big announcement that’s going to change startup investing and private investments forever. A regulation crowdfunding campaign can now raise up to $5 million in any 12-month period, up from $1.07 million.
Besides raising more money on Regulation A+, it also increases individual investment limits in some cases from $50 to $75 million. The changes will take effect in 2021.
Why are we so excited about these changes?
Regulation crowdfunding maximum investment: A company’s ability to access capital is one of the best predictors of success. Smaller companies have historically had a hard time raising capital compared to larger ones. (Think of how much easiThink about how much easier it is for a giant corporation to raise hundreds of millions of dollars in stocks or bonds than it is for most small and new businesses to raise millions of dollars.
The JOBS Act of 2016 ended all of this inequity by making it easier for private companies to raise capital from individual investors. (That’s what we call Regulation Crowdfunding.) This ruling gave us the investment crowdfunding industry we know today. Private companies have raised over $500 million using Regulation Crowdfunding since the law passed. The same legislation created another exemption, Regulation A+, that’s helped companies raise billions, including more than $1 billion just in 2019 alone.
$1 million wasn’t enough
Even though crowdfunding is getting more popular, the $1,070,000 annual cap on RegCF has put off most companies and projects that want to raise more than $1 million. A game-changer like today’s announcement makes crowdfunding more appealing to more companies. This was acknowledged by the SEC in a statement, “We believe that the amendments adopted in this release will make it easier for small businesses to access capital through exempt offerings, and we encourage the SEC to propose specific, concrete actions and commit to working on these issues.”
Startups and real estate projects can make a lot more money with $5 million than just over $1 million. By making this change, companies and projects looking to raise money under this exemption could possibly have a lower risk profile. Consequently, individual investors will have a wider choice of direct investments.
Maxwell Rich, Republic Deputy General Counsel, describes the significance of today’s announcement:
“Today’s approval of the Harmonization Rules will be remembered as the long-awaited and needed fuel to the reg-crowdfunding engine. Republic would like to thank the Commission for their efforts in meeting with, listening to, and addressing the needs of private companies and the intermediaries that serve them. We are extremely optimistic about what raising offering limits, liberalizing investor investment limits, and rationalizing communication rules will do for this industry. Republic encourages companies who previously believed Reg CF or Reg A+ were too limited for their capital requirements to take a second look.”
I can’t stress enough how important these changes are, especially the increased limit for Reg CF deals. Five million bucks is enough money for an early-stage startup to raise a full Series A round, to buy a museum-quality piece of art, or to provide the equity for a big real estate project. The changes will raise the total addressable universe of companies from billions to trillions of dollars in total value, creating a lot of opportunity for the platforms that can facilitate these investments.
We’re ready to take on these big raises at Republic, because we have the distribution, technology, and compliance infrastructure needed to power the private investment industry. Today’s announcement marks the beginning of a new era for private investing, and we’re excited to be at the center of it all.
Gratitude for the SEC and our own team
The Republic team has been part of the discussions that led to this announcement for a while, so we’re grateful for the SEC’s foresight.
We worked with the SEC to consider improvements so that private companies and individual investors are better served. Our team, including CEO Kendrick Nguyen, CEO of public fundraising Chuck Pettid, and Maxwell Rich, were instrumental. Republic is cited over 20 times in the Final Rules release, either directly or in a letter that it co-authored.
I’d also like to thank the Association of Online Investment Platforms (AOIP) for their support and collaboration.
by now we know that Regulation crowdfunding maximum investment.
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