On October 23rd, exactly one month following the SEC’s official removal of the ban on general solicitation, it voted unanimously to propose the rules that would govern Title III Crowdfunding. For the first time in 80 years, private issuers will soon be able to raise capital from the general public. But will this novel approach to capital raising make sense for most issuers?
The changing regulatory landscape along with shifting trends in communications have given rise to a number of next generation corporate crowdfinance structures. Each one best suited for specific industry sectors, regions and market capitalizations.
NowStreet’s comparison chart below was designed to make sense of the new structures by highlighting the benefits and drawbacks of selected crowdfinance offerings including PIPRs (“Private Issuers Publicly Raising”), proposed Title III Crowdfunding, Intrastate Crowdfunding and Registered Crowdfunding.
While I remain a staunch supporter of Title III crowdfunding, I’m struggling to understand why issuers would opt for this type of financing structure over other more attractive crowdfinance methods. It seems absurd for an issuer raising between $500K and $1M to subject itself to a financial audit, additional form filings and advertising limitations when it can just as easily complete a PIPR financing under the 506c exemption where there are no offering limits, no advertising restrictions, no audit requirements and no ongoing filing obligations. That said, rather than a standalone offering, Title III crowdfunding might ultimately find mainstream adoption when used in conjunction with one of the other crowdfinance financing techniques.
You can delve more into each crowdfinancing mechanism by joining your fellow investment bankers, financial advisors, fund managers, asset allocators, family offices, financial consultants as well as members of the mainstream financial media in New York City on December 16th and 17th for Crowdfinance 2013. Wall Street’s preeminent crowdfinance conference will provide participants with the knowledge needed to capitalize in a financial services industry in the midst of rapid transformation.
Dara Albright is the Founder of NowStreet Wire which is owned and operated by Crowdnetic, the leading provider of market data solutions for the burgeoning industry of crowdfinance. She is a thought provoker and frequent speaker on topics relating to market structure, private secondary transactions and crowdfinance.