What is RegCF?
Regulation Crowdfunding refers to the rules and regulations that make Mainvest, and other portals like it, possible. Prior to 2016, only accredited investors could invest in privately held companies. This is why non-accredited investors (everyday people) can invest in publicly traded companies, through vehicles like retirement accounts or apps like Robinhood, but only super-rich VCs and angel investors have access to invest in startups. The JOBS Act, Title III, changed these rules, so that through regulated portals- like Mainvest- both accredited and non-accredited investors can invest in privately held companies. RegCF has certain requirements and guidelines that portals like Mainvest, investors, and business owners must follow.
I’m an investor. What do the reg changes mean for me?
If you’re an unaccredited investor, your investment limit is changing, and most likely, increasing.
If your annual income or net worth is less than $107,000, you may invest $2,200, or 5% of your net worth or income, whichever is greater. If you’re married, you’re allowed to combine income or net worth for this calculation, but the limit would apply for both of you.
If your annual income and net worth are both at least $107,000, you can invest $107,000 or 10% of your income or net worth, whichever is greater.
If you’re an accredited investor, you no longer have limits on how much you can invest through RegCF in the timespan of a year.
Furthermore, the actual definition of accredited investor is changing.
As an investor, a business owner may now gauge interest in their investment opportunity before it goes live. Business owners cannot accept any money before the offering is filed with the SEC and any commitment the investor makes is non-binding, meaning they have no obligation to actually invest.
I’m a business. What do the reg changes mean for me?
The biggest change for businesses is that yearly offering limit is increasing from $1.07MM to $5MM.
In addition, the COVID-19 relief measures introduced last year are being extended through August. These measures allow businesses that have been in operation for at least 6 months to complete an expedited filing.
Lastly, businesses that are looking to raise on Mainvest (or any other RegCF portal) may now partake in a “solicitation of interest”, or “testing the waters,” prior to filing their Form C. This means that you can gauge interest in your campaign before it goes live. You may be excited about this, as it allows you to line up investors from your immediate network before you launch your campaign, generating excitement that may translate into better momentum for your fundraising efforts once you file your Form C to accept investment. Keep in mind that you still can’t accept any money before filing the Form C, and that investor commitments are non-binding.