As Reg CF Funding Cap Jumps to $5 Million First Issuers take Advantage of the Increased Funding Amount [u]

Beginning today, companies raising capital under Reg CF may file to raise up to $5 million from the previous $1.07 million.

The rule change was enacted by the Securities and Exchange Commission last year and became actionable today. Crowdfund Insider has heard that some issuers had held off on filing the Form C with the SEC in anticipation of the increased funding cap.

Along with the increase, several other needed improvements have been incorporated into the securities exemption. Issuers are now able to utilize Testing the Water to gauge investor interest before launching a securities offering – a feature previously unavailable and one that can save time and money.

Importantly, accredited investors are no longer subject to the same investment cap as non-accredited investors. This means an accredited investor may now invest as much as they want into a Reg CF offering. There is also a new “crowdfunding vehicle” or special purpose vehicle (SPV) that may be used. There is also an exclusion of Demo Days from being considered “General Solicitation.”

All of the changes may be viewed here – including Reg A+, Tier 2, moving up to $75 million.

The first several issuers to take advantage of the Reg CF funding cap increase include:

  • Gumroad raising capital on Republic – The company filed a Form C to raise up to $3.5 million and is the first to do so.
  • Heroic Enterprises, PBC raising capital on Wefunder. Heroic filed an amended Form C today increasing its raise to $5 million.
  • Backstage raising capital on Republic – The company filed an amended Form C indicating it may raise up to $5 million
  • Fantasy Sports raising capital on  SeedInvest – the company filed a Form C to raise up to $3.5 million
  • Comsero raising capital on StartEngine – the company filed an amended Form C to raise up to $4.35 million
  • LaneAxis raising capital on StartEngine – the company filed a Form C to raise up to $3.9 million
  • R3 Printing raising capital on StartEngine – the company filed an amended Form C to raise up to $1.63 million
  • Atmos Home raising capital on StartEngine – the company filed an amended Form C to raise up to $2.5 million

Many more offerings above the million-dollar mark can be expected going forward. Some critics have pointed out that seed rounds frequently top $2 million and thus a $5 million funding cap makes a lot more sense in the real world of venture capital and angel investing.

With the funding cap increase, Crowdfund Capital Advisors predicts that issuers will see over $1.2 billion invested over the next 12 months. The firm also expects offerings to jump by 40% and the number of investors to double to 800,000. The increase in activity under Reg CF should help push the economy forward during a challenging time as the country turns the corner on the COVID-19 health crisis.

Editors Note: it was brought to our attention there is a glitch in the Form C filing situation where the initial page is unable to accept an amount above $1.07 million Thus most issuers are indicating the increased amount on the offering memorandum that is filed along side the Form C. We have been told the SEC is in the process of addressing this minor issue.


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