Let’s tackle crowdfunding myth busting to better prepare for raising capital. What are the most commonly believed myths in crowdfunding? Let’s look at many of them to find what’s truth and what to debunk. Here we look at how existing offering exemptions already allow for public offering to non-accredited investors. We’ll examine one more myth, so look for our final blog post in a few days.
In Colorado, many of the crowdfunding opportunities created by the JOBS act are already available to entrepreneurs.
The Colorado Division of Securities already offers SCOR and RL limited registrations for public offerings to non-accredited investors for in-state deals. These registrations are rarely used, even though in some cases they represent less work for the entrepreneur than filing with a crowdfunding portal. Entrepreneurs can pay $50 and fill out a few forms and in a few weeks of regulatory review they may be legally entitled to publicly market their securities to accredited and non-accredited investors alike.
Many people confuse the two things that must occur for successful securities sales. The first is that it must be legal. There has been much excitement about the SEC releasing the details the JOBS act, but since many of these opportunities for lightweight registration have already existed for years, there must be something else missing.
That second thing missing is the marketing effort that must be expended to raise capital. Most companies seeking capital are not prepared for the process. They are promoting their companies without having put together a working team of people, without having done the detailed financial projections and analysis needed, and without having done the market research to gauge market demand and competition for their product. Even those who have gone through these steps to prepare for raising capital are often not ready for the extraordinarily difficult process of marketing their securities.
Funding portals will help companies to some extent in that there will be a place where investors can look at a good amount of deal flow in one place. Entrepreneurs will likely find that it takes more than a portal listing to sell securities and they will need to develop significant social networks and spend significant dollars and time in putting together presentations, traveling to meet investors, advertising and more.
Stay tuned for the next crowdfunding myth busting blog post on quick fixes…