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CI Interview: Securities Crowdfunding Under Reg A+, Reg CF, Fractional with Etan Butler of Dalmore Group
Crowdfund Insider | J.D. Alois | Sep 8, 2022
Dalmore Group is a regulated broker-dealer that is very active in the securities crowdfunding sector, helping firms raise money using Reg A+ (Regulation A), Reg CF, as well as Reg D. Dalmore not only enables funding via exempt securities offerings but it also provides secondary share access, including fractional share offerings.
While Reg D (both 506c and 506b) is only available to accredited investors, Reg A+ and Reg CF allow non-accredited investors to gain access to private securities. Last year, the Securities and Exchange Commission made several material improvements to the private securities marketplace including increasing the funding cap under Reg CF to $5 million, from an anemic $1.02 million and Reg A+ from $50 million to $75 million. These changes, along with several others, have been good for the securities crowdfunding market as funding portals and broker-dealers work to assist private firms to gain the growth capital they need to thrive.
As the online investment market has grown, several broker-dealers have risen in prominence in this business – Dalmore is one of them. Their name is frequently listed as the broker of record on securities offerings (think the recent Boxabl success) – including Reg A+ issuers which do not need to be listed on a platform. According to the company’s website, Dalmore has worked with over 230 issuers having facilitated over $3.6 billion in live Reg A+ offerings – including a pipeline of a whopping $4.3 billion in future securities offerings.
See: Regulatory Committee: SEC Small Business Advisory Votes to Improve Secondary Trading of Reg A+ Securities
Recently CI connected with Etan Butler, the founder and Chairman of Dalmore Group – to discuss online capital formation today and his expectations for the future:
Select Interview Highlights
- Hockey stick growth: Asked if the COVID health crisis, and rising inflation have impacted Dalmore’s operations – similar to what we are hearing about VC funding – Butler said, no it hasn’t and the number of clients and inbound calls has increased consistently.
- Online funding channels gaining popularity: Butler added that more companies are showing a preference for online capital formation as opposed to being forced into it – say a SPAC has fallen through. While there is risk in choosing any path, the option to crowdfund and raise on own terms is gaining in popularity said Butler.
- RegA+ specialists: “We work with companies looking to raise $3 to $5M which is often a bridge to a Reg A”+, he said. Butler added that they do a lot of Reg Ds but, at this point, the vast majority of their clients are Reg A+ issuers with Reg CF and Reg D offerings growing. There are also a number of Reg S (international) offerings they have enabled.
See: Free to Trade: Securities Issued Under Reg A+ May Trade in Canada
- On deal quality: Butler acknowledged that when you open up the private securities market there will be more deals that are “subpar.” But at the same time, there will be more deals that come to market that can be the “next big thing.”
- You highlight fractional shares on your website. This allows the issuer to fractionalize the asset. At the time of our discussion, Dalmore had worked with more than 35 Series issuers. Butler said these can help an investor diversify their portfolio too as they can determine what assets they hold as opposed to someone else’s fund. There is a caveat that some of these assets may have very little liquidity.
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