Regulation Crowdfunding (Title III) - Power of the Crowd

Regulation Crowdfunding, Title III of the JOBS Act, or SEC equity crowdfunding goes by many names, and allows startups to raise up to $1M.  The adoption of Regulation Crowdfunding ("Reg CF") is truly a once in a lifetime event, given the fact that it changed 80 years of securities law. However, it's still not perfect.  Many will argue that the funding limit ($1M) is too low, or that the costs of legal, accounting, compliance, and/or portal fees, are too high.  We say, you can either complain or use it to your advantage. 

As an expert CPA in Regulation Crowdfunding and Reg A+, my favorite thing lately is to attend pitch competitions where various startups vie for the attention of VC and angel investors.  At these events, there are usually 100+ people; 5 VC/Angel investors listening to pitches who couldn't be more dis-interested and 100+ people there looking on.  The question I pose to each startup presenting is all the same:

"When you present are you better served facing the 5 people who likely won't like your ideas since it is not the next "unicorn" or would it be more beneficial to turn around and present to the 100+ people behind you who may be customers, stakeholders, and evangelicals for your Company?"

The so-called smart money, will tell you why Regulation Crowdfunding won't work, why it will never be successful, why it will never be as good as the connections smart money can provide. I call that market protection by the rich and powerful.  To be honest, an enthusiastic customer base is more powerful than smart money will ever be.  Enthusiastic follows is every startups trump card which makes equity crowdfunding under Tilte III of the JOBS Act such an advantage to early stage companies. 

dbbmckennon is a full service CPA firm with offices in Orange County, San Diego and Santa Monica.  We specialize in companies filing with the SEC and utilizing equity crowdfunding through Reg A+ and Regulation Crowdfunding. For additional complimentary information regarding this topic or other questions you may have please call one of dbbmckennon‘s offices located in Southern California or contact us here.

Countdown to Regulation Crowdfunding

Everyone involved with equity crowdfunding and specifically Title III, Regulation Crowdfunding (“Reg CF”) has May 16, 2016 marked in their calendars.  Now we are just a few weeks away from that magical date and there are still many unknowns.  One of the biggest unknowns is if the funding portals will be approved by FINRA to start Reg CF.  While that variable might not be known until very close to May 16, there are steps that issuers can take to prepare for Reg CF filings.   Start by organizing your information for the Form C filing (see page 603 of 685 of the link).  One of the lengthiest steps to preparing for a Reg CF raise is getting your financial statements reviewed by a CPA, which is where we (dbbmckennon) come in.

One of the biggest misconceptions about the financial statement review process is how long it takes and what is involved.  The financial statements being presented in the Form C are virtually no different than what any US public company files with the SEC.  The financials and notes, which can be lengthy, are held to similar disclosure standards.  For very early stage companies, reviews can be done in about a week.  For business that have been around for one, two, or many years, the review process can take 2-3 weeks or longer depending on how organized the Company is.

So what does that mean.  If you plan to do a Reg CF capital raise at the very start of when it becomes available (May 16), you should contact us today to get your Reg CF financial statement review started.  With only a few weeks left, time is running out to make sure everything is complete for filing.

dbbmckennon is a full service CPA firm with offices in Orange County, San Diego and Santa Monica, focused on providing quality accounting and consulting services at reasonable rates.  We specialize in companies filing with the SEC and utilizing equity crowdfunding through Reg A+ and Regulation Crowdfunding. For additional complimentary information regarding this topic or other questions you may have please call one of dbbmckennon‘s offices located in Southern California or contact us here.