Crowdfunder Offers Up Fundraising Tips: 506(b) vs. 506(c)

Ready to offer up some tips for crowdfunding campaign organizers, Crowdfunder unveiled some details about 506(b) and 506(c). The equity crowdfunding platform explained in a recent blog post:

crowdfunder“With the passage of the JOBS Act in 2012, startup fundraising and investing has changed drastically. An opaque market that used to operate behind closed doors is now online and available to the masses. Title II of the JOBS Act led the SEC to create Rule 506(c) of Regulation D. This new filing type allows you actively market your Deal (either publicly or privately). In the past, most companies fundraised under 506(b). This regulation prohibits you from sharing your Deal with anyone you do not have a pre-existing business relationship with and who you do not believe to be accredited.

“We see a tremendous amount of value in leveraging a 506(c) raise as it massively increases your reach, while also making the entire process more transparent. Additionally, because you are actively verifying investors under 506(c) rules, there is little to no grey area about your compliance with SEC rules. In short, a 506(c) raise is safer for all parties — you as the entrepreneur, and each of your investors.”

It was noted that currently new companies signing up to fundraise on Crowdfunder will be required to comply with 506(c). The website shared its summary of the differences between 506(b) and 506(c) offerings:

506(b) Offerings

  • You may not generally solicit or do any form of advertising to market your Deal
  • You may rely on investors self-verifying their accredited status

506(c) Offerings

  • You may market your Deal to anyone, even if you elect to only share it privately within your network
  • You must actively verify that each investor is accredited before you accept their investment

Crowdfunder also revealed the benefits of using 506(c):

506(c)“First and foremost, a 506(c) offering is the safest way to leverage equity crowdfunding. This effectively eliminates the risks involved with taking in non-accredited investors. Along with a 506(c) raise being much more secure, it also expands your reach significantly as you can actively market your Deal.”

See the recommended marketing channels below:

  • Activate your social networks
  • Leverage existing customers
  • Run a marketing acquisition campaign (PPC, retargeting, Facebook, LinkedIn etc.)
    • PPC (Google AdWords)
    • Facebook
    • LinkedIn
    • Twitter
    • Remarketing
  • Execute a PR campaign
  • Highlight your Deal on your website
  • Tap into your investors network
  • Email marketing

 

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