Late last year, FlashFunders co-founder and CEO Vincent Bradley stated in an interview;
“The recent passing of Title III is a clear sign that the SEC believes this industry is a viable solution for companies to raise capital. By creating further regulatory processes in regards to Title III, it will help protect the investment community. As an intermediary, FlashFunders looks forward to working with companies and investors to help them navigate this new avenue before it takes effect. However, we anticipate many other intermediaries will not choose to go through the FINRA approval process and predict 2016 to be a year where competition in this area slows.”
While Bradley may be correct in saying the SEC believes Reg CF (Title III) crowdfunding is viable, funding portals approved under the exemption now number 17. While there is no good benchmark to measure the Reg CF platform sector, competition appears to be heating up. There have been 40 successful Reg CF offers, and only 5 of the 17 platforms are on that list. Flashfunders is there with a single successful offer. Granted the Reg CF industry is still very young but how do they compete?
Crowdfund Insider recently spoke with Bradley who was confident in their approach. Bradley pointed to the fact FlashFunders is focusing on doing side-by-side offers; raising funding under Reg D simultaneously with Reg CF. This allows FlashFunders to raise far more than the $1 million cap under Reg CF. FlashFunders is also a registered Broker – Dealer, something that brings certain benefits.
But Bradley believes Reg CF still needs to mature;
“For most quality technology companies that have access to Angels or VCs, Reg CF is not an option. Reg CF is not yet finished. I think we are still a couple years out for this really working, ” stated Bradley.
Initially, Bradley thought tech companies would want to use the new exemption. Today Bradley believes brick & mortar companies make more sense. After four months in, Bradley is of the opinion that industry growth is slow;
“We have a pretty nice deal pipeline but we are less hands-on than our competitors. We do not want to get involved with marketing. If you are willing to take on more responsibility and do more marketing it is easier to get deals up. But we do not like that in the long run. I think the business is slow for the whole industry.”
Bradley sees opportunity in more regulated industries. He mentioned craft breweries specifically – a hot crowdfunding sector globally;
“…we are talking to a lot of craft breweries right now. I think you are going to see a ton of craft breweries towards the end of the year and 2017.”
FlashFunders is also looking at parts of the country that are typically challenged to receive Angel / VC funding;
“You are seeing a lot more in Ohio, Michigan, Illinois, and Minnesota. I think there will be a lot more of that. The bulk so far is in California. It is exciting to see this take off with small business across America … We are putting a focus on cities like Cleveland, Denver, and Austin.”
Speaking specifically about Cleveland, Bradley explained that small businesses in the region have few options;
“I am working with an enterprise in Rocky River and he has no access to capital. He has a great idea. I really believe in his idea. The angel community [in Celvealnd] is just not big enough.”
Asked what needs to be changed for Reg CF to become more impactful, Bradley mentions a widely referenced litany of improvements. Testing the waters (TTW) is at the top of his list. Enabling a company to know if the demand exists before spending money on attorneys and accountants is huge. In fact, it is absolutely necessary. SPVs and increasing the shareholder account (part of the current version of the Fix Crowdfunding Act), are important too.
“I would raise the cap to $5 million. But if a company works with us they are doing a stacked offer, so it does not matter as much,” said Bradley.
Bradley said they are trying to run an economically viable platform for the long run;
“We are heads down right now. We are working on some cool stuff. We are trying to build momentum with Reg CF and working on our Back office. We may do something in Q4. We like where we are at with our business right now. I think there are a couple of us that are out in the front with Tech. From a regulatory standpoint I think we are the best. We have the best compliance officer in the business (Alan Carlysle). If you are just a marketing platform that outsources your regulatory/back office there is not really much there.”