What is Regulation CF?
Regulation CF governs how equity and debt crowdfunding can be used by entrepreneurs seeking a relatively quick and cost effective way to raise capital from their own network and the general public.
Many early-stage companies are using Regulation CF, otherwise known as "equity crowdfunding" to raise capital. While referred to as "equity" crowdfunding, the same rules and regulations can also be used to raise debt financing.
Under the crowdfunding rules, a company needs to file an information statement with the Securities and Exchange Commission that contains a description of the business and financial results. Once files, a company can utilize a licensed platform to raise capital from the general public.
Since the government allows companies to use general solicitation to advertise their offerings and permits both accredited and non-accredited investors to participate in these offerings, there are limitations to how much a company can raise and how much each investor can invest. These limitations are designed to protect the general public.
Companies that seek to raise more capital, would need to use different regulations that will require significantly more transparency, disclosures and reporting.
Equity crowdfunding can be a great way for earlier stage companies to raise capital quickly, easily and relatively inexpensively from friends, family, business associates and the general public.
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Regulation A governs how private and public companies can raise a substantial amount of equity and debt capital from their friends, family, business network and the general public.
The cost for a private company to go public varies based on many factors. Startups can go public for less than $125,000 while larger companies will certainly spend more.
It takes about eight months for a private company to go public in the United States. The process to go public in the United States is very defined. The broad strokes include organization (and sometimes reorganization), planning, preparation of financial statements, audit of those financial statements, drafting of a registration statement, review by the Securities and Exchange Commission, filing with FINRA for trading and then applying to the desired stock exchange.
Private companies decide to go public to raise capital and make it easier to recruit talent and complete acquisitions.
Investing is hard enough when presented with detailed information about a company and their team, product/service, strategy and financial results.