fbpx

Takeaways from SEC Release that Harmonizes Exempt Securities Offering Framework

On November 1, 2020, the U.S. Securities and Exchange Commission issued a nearly 400 page release detailing important changes to its exempt securities offering framework that aim to promote capital formation while preserving or enhancing important investor protections.

There is a lot to digest in the amended rules that generally:

  • in one broadly applicable rule, provide greater clarity around an issuer’s ability to transition from one exemption to another;
  • increase the offering limits for Regulation A, Regulation Crowdfunding, and Rule 504 offerings, and revise certain individual investment limits; and
  • add clear and consistent rules governing offering-related communications.

Here are three important takeaways in three minutes from our CEO and Ketsal Principal, Zachary Fallon.

For your convenience, an updated summary chart of the offering exemptions is included here.

Click to rate this post!
[Total: 1 Average: 5]

First-of-its-kind Crowdfunding Platform TheSō.Co Launches Ahead of SEC’s Proposed Rule Changes for Startups

Sō.Capital and LawCloud partner to bring new funding options to startups under a pending novel regulatory framework

First-of-its-kind Crowdfunding Platform TheSō.Co Launches Ahead of SEC’s Proposed Rule Changes for Startups 1

FOR IMMEDIATE RELEASE

Headline

October 20, 2020               

ANNAPOLIS, MARYLAND – Sō.Capital, a global crowdfunding community and marketplace, announced today that it has partnered with LawCloud, a New York-based legal technology company, to launch TheSō.Co, a new type of crowdfunding platform designed to help founders broadcast their capital raising stories and access capital. The launch is heavily tied to the U.S. Securities and Exchange Commission’s recently proposed changes to its communication rules, set to be adopted in the coming months, which will greatly expand the opportunity for entrepreneurs to actively gauge the interest of potential investors, including retail investors, at the earliest and most crucial stages of their capital raising journey.

Earlier this year, the SEC proposed sweeping changes to the ways in which companies raising capital can communicate with potential investors in exempt securities offerings, including through the use of broad-based solicitations of investor interest, such as through “testing the waters” and “demo days” communications. TheSō.Co will be the first platform to launch under the revised regulatory framework, providing startups with an invaluable tool as they learn more about crowdfunding, refine their capital raising pitches, discover and build their capital networks, and determine if capital raising is the right fit for them.

The easy-to-use platform will allow companies to create capital raising campaign pages (or pitches) that they can embed on their websites, share with customers, contacts, TheSō.Co and Sō.Capital’s website participants, and on social media in order to gauge the interest of and get invaluable feedback from the crowd. Companies can use this interest and feedback to determine whether to launch a campaign and, if so, where to do so and on what terms. In addition, companies posting campaigns on TheSō.Co will receive access to a suite of educational materials and high-quality service provider partners, like LawCloud, that are focused on helping small companies succeed.

Zachary Fallon, CEO of Sō.Capital, said: “We are building an online capital raising training and proving ground, the likes of which—for regulatory reasons—has never existed before. As a former regulator focused on helping small companies raise capital, and as an entrepreneur who has himself raised capital from investors, I not only understand the rules of the road, but also the importance of crafting a refined capital narrative in the search for investors. TheSō.Co will help companies to compliantly succeed in their journey to capital discovery.”

“The partnership with Sō.Capital in TheSō.Co will not only help entrepreneurs and small companies to activate customer lists and social networks to determine interest in a potential capital raise but will provide them with free legal and related documentation and services from LawCloud. We are excited to be able to provide companies contemplating a crowdfunding offering with complimentary access to our site and its various legal tools for small companies,” said Michael Knox, CEO of LawCloud.

About Sō.Capital                                                  

Sō.Capital is the free, easy way to discover capital online. Founded in 2019, Sō.Capital is your entry point into the world of capital raising online. The platform brings together over 50,000 capital raising campaigns from over 30 crowdfunding sites worldwide to make the process of capital discovery free, fun, and easy. With over 160,000 followers, Sō.Capital is a diverse, educated, and engaged global capital raising community. Website: https://so.capital.

About LawCloud

LawCloud, previously known as iDisclose, was founded in 2015, and is an industry leading platform in the crowdfunding and legal disclosure space with major contracts with law firms as well as funding platforms such as Water Works Funds, Title3Funds, MicroVentures, and FundMe. In addition, LawCloud offers legal document solutions for all small businesses, including regulatory documents, deal documents, HR documents and other business documents. For more information about LawCloud, visit their website at https://LawCloud.co.

For media inquiries, contact Zachary Fallon, zach@so.capital.

Click to rate this post!
[Total: 2 Average: 5]

What does the term “crowdfunding” mean?

Crowdfunding definition

Crowdfunding is the practice of funding a project or venture by raising small amounts of money from a large number of people, typically via the Internet.

It depends on who you ask. Crowdfunding can mean different things to different people. It is not a uniformly defined term nor is it used in any uniform way.  Some examples of crowdfunding can involve the sale of securities, the pre-sale of products, or capital contributions to nonprofits or charities, among others.

In recent years, crowdfunding has come to describe the process by which companies and individuals looking to meet a defined need by raising capital online through the collective capital contributions of a large number of widely-dispersed persons (friends, family, customers, and individual investors or consumers). Crowdfunding campaigns can involve, among other things, the sale of securities, contributions to support individuals or causes, and product pre-purchases.

crowdfunding meaning

Crowdfunding meaning

There are generally two defining factors in a crowdfunding campaign:

  • a crowd (that is, a critical mass of persons willing to support, invest, or contribute), and
  • small-dollar investments or contributions (on a per person basis).

These two factors combine to form a powerful capital resource for those raising money, while also providing some modicum of protection to potential campaign participants through the collective wisdom of the crowd’s critical eye. At least, that’s the idea…

See Campaigns

Crowdfunding explanation

Read more in our learning center about the different types of crowdfunding, including securities-based crowdfunding pursuant to Regulation Crowdfunding and Regulation Adonation-based crowdfunding, and rewards-based crowdfunding.

Click to rate this post!
[Total: 2 Average: 3]

What is securities-based crowdfunding?

Crowdfunding as a method to raise capital is nothing new. For example, the Statue of Liberty was, in part, funded by the crowd. But the history of crowdfunding goes back much further than that. What is (relatively-speaking) new is technology and its ability to connect and enhance the otherwise disparate power of crowds and communities to impact the sought after outcomes of fundraisers.

In the United States, until recently, crowdfunding generally could not involve the offer or sale of a share in any financial returns or profits that the fundraiser expected to generate from its business activities. In other words, companies generally couldn’t sell securities. This is because, under the Securities Act of 1933, any offer or sale of securities is required to be registered with the SEC unless an exemption from registration is available. Yet, registration is an expensive endeavor and not for the faint of heart. And, prior to the changes brought about by the Jumpstart Our Business Startups Act (the “JOBS Act”) in 2012, there was no effective exemption from registration by which a company could conduct a securities-based crowdfunding campaign.

Now that the SEC has implemented all of the JOBS Act provisions (and then some), companies in the United States can now effectively raise capital in securities-based crowdfunding campaigns.

Search Securities
Want to learn about the different methods of conducting a securities-based crowdfunding campaign in the United States? We have high-level primers and links to additional materials here:

Contrast these with the requirements for Private Placements.

Looking for information about other types of crowdfunding campaigns? Here’s some information on donation-based and rewards-based campaigns. 

Click to rate this post!
[Total: 2 Average: 3.5]

What is rewards-based crowdfunding?

Rewards-based crowdfunding is perhaps the most recognizable type of crowdfunding. This is due in large part to the success of early movers in the space, like Kickstarter and Indiegogo. Like most crowdfunding campaigns, rewards-based campaigns typically involve small dollar contributions from individuals to projects in return for some kind of reward. Unlike securities-based campaigns, contributors to rewards-based campaigns typically do not receive or expect any financial return for their contributions. Of course, there is nothing to prevent the combination of aspect of securities-based and rewards-based crowdfunding in a single campaign. Unlike donation-based campaigns, however, contributors to rewards-based campaigns do expect some return on their capital contribution. That return just generally comes in the form of a reward, which usually reflects the amount contributed.

Rewards can be anything and range from tee-shirts and coffee cups to early versions of a proof-of-concept product, like a new blender or the world’s coolest cooler.

Search Rewards

Click to rate this post!
[Total: 1 Average: 5]