Some Background
It is no secret that venture capitalists dominate the startup space. Most startups move forward at the whim of venture capitalists just to survive. And just as you see on Shark Tank, venture capitalists set the terms of the deal. Behind the scenes, this industry is evolving very quickly. And as the SEC’s new amendments to Regulation Crowdfunding go into effect today, even more power has just been given to small businesses and retail investors.
Retail investors have traditionally lacked two critical pieces needed to invest in startups: Opportunity and information. The internet has changed this forever. Retail investors have the world at their fingertips and countless online communities are constantly discussing various stocks and investments. Even more important, online platforms like PicMii Crowdfunding are giving retail investors a location to participate in these investments. The end result is that small businesses can now achieve funding on their own terms; all while building a community that knows and believes in their product or service.
SEC Updates to Regulation Crowdfunding
Regulation Crowdfunding is significant because it is the only regulatory exemption that allows for non-accredited investors to partake in crowdfunding offerings. To put it simply, under this regulatory exemption, everyone has the ability to partake in startup investing.
After a long wait, the final rules published in the Federal Register become effective today March 15, 2021. These rule changes include a significant increase in funding limits for companies raising from $1.07 million to $5 million. This is a massive limit increase that will have a drastic impact on the industry. More companies will now be interested in raising through regulation crowdfunding; bringing more opportunities to the retail investor. This will likely contribute to additional growth of the crowdfunding industry beyond current projections.
Beyond the limit increase are additional rule changes that many companies and crowdfunding platforms have been waiting for. One such rule change is the ability for companies to raise through a special purpose vehicle (SPV). Companies can now utilize a separate LLC, provided that certain requirements are followed, to raise funds in order to maintain a clean cap table. For companies raising larger funding amounts, the number of retail investors participating in the campaign has been a huge concern up until now because of the potential effects on their cap table. Again, this rule change will add to the attractiveness of raising through crowdfunding and will contribute to additional growth in the industry.
The crowdfunding industry is growing fast. Much faster than most realize. While some companies may choose to go the traditional venture capital route, more and more companies will be raising through crowdfunding for its many benefits. It really is time that retail investors are given the same opportunity as venture capitalists to invest in these startups. After all, plenty of venture capitalists have passed on future unicorns that retail investors may not have if given the opportunity.
It’s Time to Find Your Inner Venture Capitalist
At PicMii, our focus is that everyone has the opportunity to participate in startup investments. Crowdfunding is the future of startup investing and we are here to guide you along the way.
