This puts you at the same table as a startup founder…
Before, if you wanted to invest in a startup, you had to know a guy who knew a guy.
Just look at Saint Francis High School. Barry Eggers, a parent who was an advisor at the school’s venture-capital fund, noticed how his kids were glued to an app from a certain startup. His firm, Lightspeed Venture Partners, was the first investor in the startup and, at the urging of Eggers, the school made a $15,000 investment in the app company of its own.
That company was Snapchat.
That $15,000 investment? It was worth $34 million by March 2017.
Great story, but again – you had to know a guy who knew a guy. Or you had to have a net worth that topped $1 million to get in early.
Your Own Private Deals
Thanks to changes in the law, you now have a chance to invest in startups just like insiders and accredited investors.
It’s called Regulation Crowdfunding (Reg CF), which came into effect on May 16, 2016, as part of the previously enacted Jumpstart Our Business Startups (JOBS) Act of 2012. It allows eligible companies to sell securities through crowdfunding.
One of the biggest appeals is that you’re building a relationship with a company that could see many rounds of funding well before it debuts on a major exchange.
In essence, that could mean the same type of access to the same potential opportunity as what the Saint Francis investment fund had.
But before taking advantage of Reg CF investing, it’s important to know a few details. There are some stipulations.
The Nitty Gritty of Reg CFs
The U.S. Securities and Exchange Commission (SEC) states all transactions must take place online through an SEC-registered intermediary. This would essentially be a broker-dealer or a funding portal.
There’s also a cap on the funding a company can receive set at $1,070,000 for every 12-month period. However, the SEC is considering raising the cap to $5 million.
Additionally, there are limits on the amount of money an individual can invest across all offerings in a 12-month period, as well as caps based on an individual’s annual income.
These are as follows:
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Lastly, the SEC requires disclosure of information in filings to all parties involved. This includes company board and business plan information and financial disclosures no older than 12 months. Additionally, a company must provide periodic updates on progress, annual reports and immediate updates to any changes in their deal offer.
These regulations offer investors much-needed transparency and are in place to protect you rather than limit your ability to see outsized gains.
In fact, we’re bringing two REG CF deals to the members of Cannabis Venture Syndicate in less than a week.
You can learn more about the ways you could use Reg CF and other strategies to make the most of your money, starting today.
49 responses to “Everything You Need to Know About Reg CF Investing”
March 23 2020