At the Annual SEC Government-Business Forum on Small Business Capital Formation SeedInvest, a prominent US based investment crowdfunding platform, delivered an update to the Commission and forum participants. SeedInvest is a full stack investment crowdfunding platform. They work with issuers looking to raise capital under Reg D, Reg A+ and Reg CF. They also operate a wholly-owned broker dealer.
Some of their data points include:
- 140,000 total investors
- 22,000 accredited investors
- 8500 company applications (acceptance rate is about 1%)
- Approximately 3500 investments in Q3
Feit shared some interesting information regarding the industry.
Reg D, 506c, where an issuer may generally solicit (SEC speak for advertise) has seen declining usage. This is because of the “friction” with accredited investor verification. Under Reg D, 506b, investors do not have a similar standard to prove their accreditation status but issuers may not advertise the offer. SeedInvest uses both Reg D 506b & 506c to raise capital.
Reg A+ has shown “significant promise” so far. On SeedInvest, about 55% of total dollars come from non-accredited investors in their Reg A+ offers. Total individual investments stand at about 8500 with an average commit of $1150.
Feit said a few tweaks to Reg A+ would “dramatically improve small business capital formation”. These included removing or limiting auditing and reporting requirements or alternatively removing state review for Tier I offers. Feit explained that coordinated review by the state regulators, as promoted by the North American Securities Administrators Association (NASAA), simply does not work.
Reg CF, the youngest exemption, is showing “increasing interest”. While off to a slow start, Feit believes that is to be expected.
Feit told the Commission updated rules as defined in the original version of the Fix Crowdfunding Act would address some of the obstacles. The original version of the Act increased the exemption to $5 million, allowed for SPVs to be utilized and enabled “testing the water” prior to an actual offer. The Fix Crowdfunding Act passed the House but many of the improvements were stripped out before it was sent to the Senate.
The presentation is embedded below.