Mahi Sall, Advisor, Fintech-Bank Partnerships, Payments and Financial Inclusivity
January 25th, 2023
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US Reg CF Funding Portals: 50 in Total with Several Exits and Several Additions. Is Reg CF Ready to Scale?
Crowdfund Insider | | Nov 18, 2019
Periodically, Crowdfund Insider revisits the Reg CF sector of online capital formation. Reg CF or “Regulation Crowdfunding” may have garnered most of the attention from popular media but really there are three individual crowdfunding exemptions including Reg A+ and Reg D 506c.
Under Reg A+ you must file an extensive offering circular with the entire offering process costing around $300,000, according to one estimate. But Reg A+ enables an issuer to raise up to $50 million from both accredited and non-accredited investors.
Under Reg D 506c, you may raise an unlimited amount of money but only from accredited investors. This is the most popular crowdfunding exemption and Reg D (5o6c and 5o06b) is a trillion-dollar market.
Issuers using Reg CF may only raise $1.07 million and must utilize a FINRA regulated Funding Portal or a broker-dealer. Due to the low cap on funding, frequently issuers will do a side-by-side Reg D 506c offering to circumvent the extremely low amount you may raise.
Last time CI revisited the number of approved Funding Portals was in July. Since that time, several new funding portals have joined the approved list and several have exited.
See:
What the European Crowdfunding Industry Recommends for Harmonized EU Rules
NCFA Canada’s submission to Finance Canada (March 2018): Urgent Need for Regulatory Change and Government Support
Regarding Reg CF funding portal exits – two more have departed this sector of crowdfunding.
EquityBender based in Charleston, South Carolina, is no more. The domain just indicates a private site.
Seeding VR is the other exit. As the name indicates, Seeding VR was targeting the virtual reality sector. Apparently, it even attempted to launch a crowdfunding platform in the UK. Today, both domains simply time out.
This brings the total of funding portal exits to 12 with at least two the direct result of some time of enforcement action: UFP LLC and DreamFunding Marketplace.
The three additions to the list bring the total to 50 FINRA approved funding portals with one in question as Fundpaas has long been on the suspended list and is expected to join the exits.
The three recent additions include:
- Fundopolis in Boston Mass
- InfraShares in San Francisco, CA
- Prospect Equity Portal LLC New York NY
Fundopolis has yet to list its first offering but appears ready to launch its first issuer. According to its website, Fundopolis expects to also enable issuers to raise capital under both Reg A+ and Reg D as well.
Infrashares is described as follows: “InfraShares is a crowdfunding platform that pools investment from individuals into large sums of development capital for critical infrastructure projects (roads, bridges, airports, mass transit, water systems, renewable energy and schools).”
This platform is utilizing Reg D as well. Currently, there are two issuers posted on the site -both under Reg D 506c.
Prospect Equity does not appear to have a live site as of yet.
As Crowdfund Insider reported in October, Reg CF has raised over $300 million in securities offerings since the exemption became actionable in May of 2016, providing capital to over 2000 campaigns. This is according to a report by Crowdfund Capital Advisors.
See: When fintech met crowdfunding
Overall, Reg CF can be called a success as it has helped smaller companies raise much-needed growth capital while creating new jobs. But multiple shortcomings hobble the exemption thus undermining its potential success.
First, the fund cap is widely recognized as far too low.
Average seed rounds in the US stand at about $2.2 million – typically using Reg D. A good number raise much more.
In the UK, the most robust crowdfunding market in the world, issuers may raise as much money as they want. A prospectus requirement at €8 million creates a virtual speedbump for issuers looking to raise more than that amount.
Continue to the full article and list of 50 US RegCF platforms --> here
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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