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JOBS Act – Crowdfunding Regulation and Revisions

The passage of the JOBS Act created several crowdfunding methods for entrepreneurs and investors within the USA capital markets (the JOBS Act also revised other existing investment law not discussed here).  Each crowdfunding method allows for "general solicitation" by entrepreneurs to potential investors, and allows for non-accredited investors in participate (except for under Rule 506(c), below).  Each crowdfunding alternative provides different features and parameters, such as, but not limited to, (1) the maximum amount of capital raised, (2) who can invest, (3) max investment amount of each investor, (4) involvement of internet portals, (5) the level of SEC oversight, (6) and the length of the process.  Listed below are five (5) JOBS Act crowdfunding alternatives with a condensed outline of features and parameters (please remember that some of these offering methods were available without the crowdfund component, such as Regulation A and Regulation D (Rules 504 505 and 506) and Safe Harbor Rule 147 Intrastate offerings):

  1. Title II Revision of Regulation D, Rule 506(c):
    1. Maximum Amount of Capital Raised:  No Maximum
    2. Cost (Relatively Speaking):  Low
    3. Accredited and Non-Accredited Investors:  Accredited Only
    4. Internet Portals Allowed:  Yes (Required Under Certain Circumstances)
  2. Title III Crowdfunding:
    1. Maximum Amount of Capital Raised:  $1 Million, per 12 Months
    2. Cost (Relatively Speaking):  Low
    3. Accredited and Non-Accredited Investors:  Both
    4. Internet Portals Allowed:  Yes (Required)
  3. Title IV – Regulation A+
    1. Tier One:
      1. Maximum Amount of Capital:  $20 Million, per 12 Months
      2. Cost (Relatively Speaking):  High
      3. Accredited and Non-Accredited Investors:  Both
      4. Internet Portals Allowed:  Yes
    2. Tier Two:
      1. Maximum Amount of Capital:  $50 Million, per 12 Months
      2. Cost (Relatively Speaking):  High
      3. Accredited and Non-Accredited Investors:  Both
      4. Internet Portals Allowed:  Yes
  4. Regulation D, Rule 504:
    1. Maximum Amount of Capital Raised:  $1 Million, per 12 Months
    2. Cost (Relatively Speaking):  High
    3. Accredited and Non-Accredited Investors:  Both
    4. Internet Portals Allowed:  No

The crowdfunding method chosen by the entrepreneur / start-up business depends upon the current growth stage of the business and its long-term goals and objectives.  Crowdfunding is changing the method entrepreneurs access capital and the type of investors involved in business capitalization by allowing "general solicitation" and by allowing non-accredited investors to participate.  Whether its a start-up business looking to crowdfund, or an established small business, contact Davis Law for our your legal and business consultation needs.  Davis Law:  404.901.2500 and 770.922.8500

For more information on the Invest Georgia Exemption, please click HERE.

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