The number of restaurants leveraging Reg CF is increasing dramatically, according to a report published by Crowdfund Capital Advisors (CCA).
Reg CF is the smallest of the three crowdfunding exemptions utilized in the US. Under Reg CF, an issuer may raise up to $1.07 million by listing a security on a regulated funding portal or broker-dealer. Frequently, Reg CF issuers are consumer-facing businesses that look to raise capital from affinity groups or users of their services. Restaurants, according to CCA, have benefited from this security exemption which became actionable in 2016.
According to the report:
“[The number of restaurants have] nearly doubled the second year to 25 and grew to 37 in the third fiscal year. A 164% growth in just 2 years. With an inflection point coming, we believe 400 restaurants per year will seek funding by 2023.”
CCA states that restaurant securities offerings is one of the top industries in Reg CF crowdfunding and, on average, they raise $240,000 or 4.2% greater than all companies raising under Reg CF.
Additionally, the success rate for Reg CF – restaurant offerings is quite high at around 77%. So far in 2019, restaurants have raised over $21.2 million.
Regarding platforms, “the most successful equity crowdfunding platforms for restaurants are Nextseed and WeFunder. They have 40 and 21 campaigns and $9.3 million and $3.6 million raised respectively,” reports CCA.
CCA recommends that restaurants in need of growth capital start with Reg CF as opposed to more traditional funding. If an entrepreneur is successful with Reg CF they may then leverage this experience to raise additional capital. CCA states that a variety of securities are being used by restaurants with the most popular being revenue share offerings or debt.
Once a restaurant is funded using Reg CF the company benefits from the ongoing support of its investors as they are committed to the company’s success.