The regulatory environment continues to evolve for investment crowdfunding. While many people may have heard of the various federal exemptions that allow non-public companies to sell securities online (Reg D 506c, Reg A+ and Reg CF) most people are probably unaware of the fact that a majority of states have created bespoke regulations to empower local businesses to crowdfund their business.
As of July 31st 2017, there were 34 states, plus the District of Columbia, that have enacted regulations to legalize crowdfunding. This nascent sector of crowdfunding has seen light utilization for the most part with Texas leading the way with the most issuers (at last report). But some industry observers believe that intrastate crowdfunding rules may provide a more viable channel for early stage companies to raise growth capital.
Amy Pearl, founder and Executive Director of Hatch Innovation, sees profound opportunity for small businesses to leverage these exemptions;
“There is enormous opportunity for positive impact to be found in investment crowdfunding. Slowly, national and state agencies are waking up to the potential for economic and community development, a stronger startup ecosystem, and the growth of small businesses, in every state of the union,” says Pearl. “The dark horse of investment crowdfunding is the intrastate exemption. More and more states have quietly been added to the growing list of those who have legalized community investing – 37, many recently confirmed – and who are emerging as a force in the economic engines in communities everywhere.”
Pearl explains there are challenges in moving this idea forward. These hurdles are shared by both national and state exemptions, including investor awareness and education, and entrepreneur compliance. As part of her mission and that of Hatch, Pearl has launched ComCap17 – a community capital focused conference that is scheduled to take place in Monterey, California next month [Editors note: Crowdfund Insider is a sponsor of ComCap17].
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The North American Securities Administrators Association (NASAA) has compiled a list of all current exemptions along with several that are in process. NASAA has been a proponent of the intrastate crowdfunding exemptions. The document is embedded below.
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