Regulation Crowdfunding is a Different Ball Game

By  Crowdfunding Strategy, Personal Cloud Technology, CrowdFund Beat Guest post,

For the last six months or so I have been working with both portal owners and offering issuers to prepare for Regulation Crowdfunding (Title III). Having been in the trenches on multiple sides I have been able to observe some of the shortcomings and successes of the new crowdfunding law and those taking advantage of it. I want to focus on one area of observation (and frustration) we have come across.

Just because you were successful with Reg D or even Reg A+ doesn’t mean you know what you’re doing with Reg CF. Similarly, having been successful in the investing space for the last 20 years may not translate into crowdfunding success.
The first and most apparent reason for the above statement is that with a new regulation comes new requirements and nuances. This is something that everyone has to deal with, but will be resolved in time as regulators, portal owners, and issuers alike work out the kinks. In this case however, new regulation makes it harder by taking away some of the crowning features in previous crowdfunding laws such as open solicitation and the ability to test the waters. This means you can’t openly target and advertise the offering to potential investors out there or spend time testing the market with indications of interest from the crowd before going all in. Couple that with a new class of investor who thinks very differently and has a basic level of understanding when it comes to securities investments.

 

Given this landscape, even those who have run a successful portal targeting accredited investors are struggling to garner interest and action from new investors for offerings under Reg CF (Title III). One major reason for this is that the way you target and work with the general public to get them to invest is a lot different than your traditional investor. The strategy needs to change, and addressing the bullet points below may help:

Most people aren’t actively looking for an investment opportunity like an accredited investor might. This means it will take a very deliberate strategy and knowledge of marketing to the general consumer to drum up interest. Focus on the product, the company from an outside view, and target emotion or support for a greater cause.
“The Crowd” wants it simple. They don’t understand and therefore won’t care much about sophisticated asset classifications, rights, options, etc… They want to support a small business and have ownership in that company. Focusing on educating the market could be key in time to come.
There is a stronger component of wanting to be a part of something bigger as well as make a return on the investment. Reg CF is the next natural step for those participating in rewards based crowdfunding. These new investors will need to be sold on vision of the company/investment to fill the void of not receiving a product or something of value right away.
As new amendments are presented and passed to fix regulation crowdfunding things will get easier for all the parties involved, but regardless of those factors we as an industry need to hone in our marketing and services to better serve the millions of potential investors who are beginning to enter the investment crowdfunding arena.

 

Again, this was just one observation I’ve had thus far working with Title III offerings. Feel free to share your observations in the comments section!

Tags: , , , , , , , , , , , ,

Leave a Reply

Your email address will not be published.

HEADLINE NEWS

When survival is a popularity contest: the heartbreak of crowdfunding healthcare  The GuardianA growing number of Britons are turning to online fundraising for essential treatment in a desperate, 'Dickensian' attempt to get around NHS shortfalls. But does ... [...]

French Startup BeeLife Is Aiming To Make Crowdfunding History  ForbesFrench startup BeeLife is hitting the market with its revolutionary bee hive, which it hopes will engender a new generation of beekeepers, rebuild the bee ... [...]

Crowdfunding firm Prodigy is broke, former exec claims in defamation lawsuit  The Real DealA former exec is suing real-estate crowdfunding platform Prodigy Network, alleging that the company's "cash difficulties" are the fault of CEO Rodrigo Niño. [...]

Schafer: VivaQuant makes intriguing bet on equity crowdfunding  Star TribuneMaybe no one really said equity crowdfunding would one day be bigger than going public on Nasdaq, but whatever the expectation when equity crowdfunding ... [...]

New German Crowdfunding Regulation: Major Enhancements, A Few Regrets  Crowdfund InsiderThe German Crowdfunding Association, the federal industry association which represents 85% of the German crowd investment market, welcomed last week ... [...]

Malaysia Turns to Property Crowdfunding as Banks Reject Loan Applications  BloombergMalaysia's government is turning to the wealth of the masses, instead of reticent banks, to help solve a $4.8 billion property overhang. [...]

FTC sues 'iBackPack' founder for deceiving crowdfunding backers  EngadgetAfter a months-long investigation into the practices of the crowdfunding campaign for iBackPack, the Federal Trade Commission announced today that it will sue ... [...]

John Zorn's Rebound From PledgeMusic's Implosion  NPRJohn Zorn, the prolific and brilliantly iconoclastic composer, realized a dream of sorts last year when he released The Book Beriah — a box set of 11 new albums ... [...]

This crowdfunding firm just picked the carcass of RealtyShares  The Real DealThe remnants of RealtyShares — the now-defunct crowdfunding platform — have been scooped up by another real estate firm. New York-based iintoo acquired ... [...]

Build crowdfunding momentum by first building trust  Knoxville News SentinelThese small business owners learned firsthand how to succeed with crowdfunding. Their lessons can give your own crowdfunding a boost. [...]

CFB Finance

Marketwired

  • Crowdfunding
  • Crowdfund
  • Peer to Peer Lending
  • FinTech
  • Reg A+
  • Reg CF
  • Crowdfunding USA

Press Release

Live Crowdfunding .tv

What's Next Step in Regulation A+ JOBS ACTS Title IIII :L Interview : Steve Cinelli with Brian Korn Securities and Crowdfunding/Peer-to-Peer Lending Lawyer, Watch more video library | Conference | Interview | Campaign Showcase | Research | Education |