Revisiting Regulation Crowdfunding

                                                                               By Sheri Lupoli for Trella Technologies

 

Fall is pretty amazing. I know many would argue that summer is the champion of seasons, but I think people around here get a bit more social when things cool down. I've been attending lots of amazing virtual events for food and Cannabis communities, and I recently found myself at an event where Regulation Crowdfunding (RegCF) was being discussed. It  has become a pretty hot topic among small business owners who understand the socio-economic impact of equitable investment opportunities. 

Reg CF - What it is and what it isn't

Since it has been quite a while since we last discussed RegCF, I thought it time to revisit our conversation from over a year ago. Our original blog post "Turning Supporters into Investors via RegCF"  appeared in July of 2020. Since then, we have learned even more, and would like to share what we know in hopes that it might be useful to anyone who is interested in either investing in a business or beginning a fundraising campaign with RegCF.  I'd definitely recommend checking out that original post, but here are a few of the main ideas:

  • RegCF is also known as "equity crowdfunding"
  • It is regulated by the Securities and Exchange Commission (SEC)
  • It allows entrepreneurs lacking social capital, such as women, people of color, LGBTQIA+ individuals, and other traditionally marginalized groups, to raise money to fund entrepreneurial endeavors
  • It opens up investment opportunities for the public regardless of their wealth status 
  • It IS NOT a donation-based or subscription-based platform like GoFundMe, Kickstarter, or Patreon

A Deeper Dive: Convertible Notes vs. SAFEs

It is important that investors and entrepreneurs understand that the value of a company is not determined immediately. In the early stages, investments are not the type that can be directly turned into equity and cashed in. Instead, there are other types of early stage investments through Reg CF:

  • Convertible notes - a type of "loan" that the company will pay back to the investor with interest
  • SAFEs - a type of investment that will turn into equity once the company's valuation is determined  

Check out Aja explaining the difference:

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And to see how Trella uses RegCF to fund its operation, visit our "Testing the Waters" campaign on Wefunder.**

Hope this was helpful! Until next time, keep growing strong!

**NOTE: Testing the waters legal disclosure.

We are 'testing the waters' to gauge investor interest in an offering under Regulation Crowdfunding. No money or other consideration is being solicited. If sent, it will not be accepted. No offer to buy securities will be accepted. No part of the purchase price will be received until a Form C is filed and only through Wefunder’s platform. Any indication of interest involves no obligation or commitment of any kind.