How To Turn Supporters Into Investors
One of the chief challenges entrepreneurs share is the age-old question: “How are we going to pay for this?” It takes capital to turn an idea into a prototype, and more capital to make adjustments along each step of the journey leading to your final market-ready product or service. For entrepreneurs lacking social capital, such as women, people of color, LGBTQAA+ individuals, and other traditionally marginalized groups, raising money to fund an entrepreneurial endeavor is an even more daunting task.
So when we at Trella Technologies learned about Regulation Crowdfunding, we were excited to find an inclusive and regulated way that worked for us to raise the financial capital we needed to get our next prototype into production and expand our team.
What is Regulation Crowdfunding? What’s Reg CF?
Whether interested as an investor or entrepreneur, it’s important to understand exactly what Regulation Crowdfunding or “Reg CF” is. At its core, Reg CF, which is also known as “equity crowdfunding,” allows companies to raise investment capital from the public via an online broker platform such as StartEngine, Crowd Ignition, and Mainvest, among some 40+ others. These platforms allow entrepreneurs to access the interest and investment from a much broader community of investors, rather than limiting fundraising efforts to friends and family.
Reg CF also creates an opportunity for fans of a business to become a real investor, which cements their loyalty and positions them to be strong advocates for your business because when you succeed, they’ll succeed. Just be aware that while international investors are allowed to participate, not all countries can participate legally in Regulation Crowdfunding.
Another benefit of Reg CF is its accessibility because it opens up investment opportunities for the public regardless of their wealth status. The Jumpstart Our Business Startups Act, also known as the JOBS Act of 2012, requires that new businesses get their investments from accredited investors, which are people with a high net worth or certain cash-rich businesses such as banks and insurance companies. Since the majority of the population doesn’t meet the requirements to be an accredited investor, their investment options are severely limited. Now, with Reg CF, anyone can be an investor in companies that they admire!
As with most investments, Reg CF involves risk and is regulated by the US Securities and Exchange Commission (SEC). If you’re interested in Regulation Crowdfunding to kickstart your entrepreneurial endeavor, there are some essential first steps you must take before you can accept Reg CF investments. Also, the actual online broker platforms through which you’ll raise money must be approved by and registered with the SEC.
To get Trella Technologies started with Regulation Crowdfunding, we filed a Form C with the SEC. Then, in order to put the offering out there and start accepting investors, we evaluated several online broker platforms and decided on StartEngine.
Who should use Reg CF?
Reg CF is generally best suited for private, early stage companies within a very wide range of industries and a variety of business models. Just note that different online broker platforms may be better suited for particular industries or types of companies, so do your research and find the one that resonates most with your industry, business model, and the customers or people you plan to serve.
It’s also important to understand what Regulation Crowdfunding isn’t. Popular sites like GoFundMe, Kickstarter and Patreon may seem similar at first blush, but those are different donation or service-based subscriptions and are not regulated by the SEC.
Are you ready to take, or already taking the Reg CF plunge?
Let’s talk about getting you on an upcoming episode of the Reg CF Chronicles with Trella cofounder Aja N. Atwood! Learn more at ajaatwood.com/regcf