Comparative Analysis of Crowdfinance Offerings
October 30, 2013 by Dara Albright, NowStreet Wire
Dara Albright is the Editor in Chief of NowStreet Wire and Managing Director of Crowdnetic, the leading provider of market data solutions for the burgeoning industry of crowdfinance. She is a thought provoker and frequent speaker on topics relating to market structure, private secondary transactions and crowdfinance.
The long awaited Title III Crowdfunding Rules were finally proposed last week by the SEC. Although the 568 page document seems like a mere footnote in comparison to the Obamacare bill, it’s still a lot to digest considering most attention spans these days lack the capability of reading a complete tweet.
In all sincerity, I commend the SEC for putting a great deal of diligence into a legislation that has the potential to reinvent capital formation and democratize the flow of capital. However, after reading the proposed rules (and admittedly falling asleep once or twice), I’m struggling to understand why issuers would opt for this type of financing structure over other more attractive crowdfinance methods.
For instance, why would an issuer raising $1M subject itself to a financial audit, additional form filings and advertising limitations when it can just as easily complete a PIPR (“Private Issuers Publicly Raising”) financing under the 506c exemption where there are no offering limits, no advertising restrictions, no audit requirements and no ongoing filing obligations? (Information on PIPRs can be found on Dow Jones’ MarketWatch in the “Education Section” of Private Offerings).
While I remain a staunch supporter of interstate securities crowdfunding, my fear is that Title III crowdfunding (as proposed) will have difficulty finding mainstream adoption. The additional regulatory burdens will make the cost of raising small amounts of capital too high for most emerging businesses. And when capital is too expensive, neither issuers nor shareholders stand to benefit.
That said, Title III crowdfunding might prove best when used in conjunction with other crowdfinance financing techniques. My advice to issuers and bankers would be to get smart on the various corporate crowdfinance options and understand which mechanism best suites specific industry sectors, regions and market capitalizations. NowStreet’s comparison chart below can provide some guidance as it illustrates the benefits and drawbacks of selected crowdfinance offerings including proposed Title III Crowdfunding, PIPRs, Intrastate Crowdfunding and Registered Crowdfunding.
You can delve more into each crowdfinancing mechanism by joining your fellow investment bankers, financial advisors, fund managers, asset allocators, family offices, financial consultants as well as members of the mainstream financial media in New York City on December 16th and 17thfor Crowdfinance 2013. Wall Street’s preeminent crowdfinance conference will provide participants with the knowledge needed to capitalize in a financial services industry in the midst of rapid transformation.
RESERVE YOUR SEATS NOW FOR CROWDFINANCE 2013!