Yesterday, the Securities and Exchange Commission updated rules affecting the exempt offering ecosystem. Many of the changes impact online capital formation and the regulatory environment that issuers may leverage to raise capital online and the ability of platforms to assist in these securities offerings. The changes have been embraced by the US investment crowdfunding sector – a segment of Fintech that has struggled under current rules that tend to create unnecessary hurdles for smaller firms seeking growth capital.
Securitize is a digital asset platform that has been a leading voice in the transition from analog securities offerings to digital securities. This digital transformation is widely accepted as a question of if – not when. Reducing affiliated friction and the cost of primary issuance and the following management of the investors and securities is a near term goal for all platforms. Crowdfund Insider spoke with Carlos Domingo, co-founder & CEO of Securitize, to hear his thoughts on the regulatory changes.
“Raising the limits makes crowdfunding much more viable as a first round funding opportunity for startups vs VC as it will give a company enough of a ramp to prove product / market fit,” said Domingo. “This will allow access to a lot more investors as well so it’s a great thing for main street and retail investors who will now be able to access deals with a better chance of success thanks to the potential additional capital.”
Domingo said that Securitize is already seeing massive growth in both Reg A+ and Reg CF. Domingo said that with Reg CF there are real numbers to prove it that show a 300% increase in commitments in just 6 months since the pandemic began in March.
So how will this impact digital assets?
“We expect that more and more startups will look to leverage Reg CF and then transition to Reg D when they need to do a larger capital raise. These issuers and investors will be well versed in online investment so this should really supercharge the overall ecosystem. Additionally when you have a large amount of investors then there will naturally be a search for liquidity which should bring demand to the ATS space since this is one of the few viable options for liquidity.”
And what about digital securities and Securitize? Will this help to fuel digital transformation in the securities sector?
“Absolutely,” said Domingo. “We decided to invest in Reg CF late last year through a partnership with Republic and have on-boarded over 40 issuers in a few months. We expect to see this grow at an increasing pace and bring tens of thousands of investors to the new ATS’s that are launching.”