Reg D - Turns out it still takes money to make money.
A bit ago I was on a webinar for Financial Poise, where I said that startups can expect to have a sunk cost of ~$46k in travel expenses alone and expect to take on average 21 months to raise money using the Reg D exception. On the webinar was “Mark”, the archetypical securities lawyer, who in typical lawyer fashion disagreed vehemently with these figures. So, what follows is a simple breakdown of typical expenses incurred in raising money via not only via Reg D but also JOBS ACT Reg CF and Reg A/A+ crowdfunding. Because it turns out that it still takes money to make money.
The Sunk Costs of Raising Capital
“A sunk cost is a cost that has already been incurred and cannot be recovered.”
There are numerous sunk costs in raising capital. For the entrepreneurs out there who will actually cut the checks here are the cold hard facts.
Reg D
Raising money via Reg D is the easiest and cheapest way to raise money if:
- You have an established business that is current
The State of The League Is Strong
Regulation Crowdfunding turned five years old on May 16, 2021 and celebrated its birthday with 63 FINRA licensed portals and over $700M raised via RegCF. This is an amazing milestone for the investment crowdfunding industry and what I refer to as "The League”. The League is the 63 and counting FINRA licensed Funding Portals. Even today, there are another two dozen entities with Funding Portal applications with FINRA looking to join the league and 2022 is shaping up to be a $1B year. On behalf of the Crowdfunding Professional Association we are rooting for all of you.
As I think about the state of the Crowdfunding industry and the individual funding portals I often compare them to the National Basketball Association (NBA). That league started off small, hit an inflection point and then grew into the dynamic global presence it is now. So too with the 63 “teams” of the CfPA. To that end here is a peak of what the Crowdfunding Professional Association will be doing to help the ...more
How to raise your first $107k in investments
How to raise your first $107k in investments - The beauty of RegCF Investment Crowdfunding
The first dollar is always the hardest. Whether you’re trying to earn it, generate revenue or raise it. It all starts with Dollar One. And, knowing that you're a busy Founder, CEO or CFO so I’ll save you a long read and just let you know the following 3 facts:
- It costs you sweat, creativity and drive to raise your company’s first $107k using RegCF.
- After the first $107k, it will cost you about 10% of your goal to try and raise your desired amount. Most of that goes towards marketing.
- If you hit your $107k, you can amend your filing and continue to raise money just like these Founders did:
- At Ease Rentals ($303k raised from 295 investors)
- Cornbread Hemp ($492k raised from 870 investors)
But don’t take my word for it. Listen to this interview with Jim Higdon, Chief Communications Officer of CornBreadHemp to learn more about how Cornbread Hemp used RegCF to raise thei...more
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