Capital Ideas podcast hosts Nick Morgan and Dara Albright had an insightful discussion with Etan Butler, Chairman of Dalmore Group, a leading crowdfunding platform that has raised over $1.5 billion for businesses through JOBS Act exemptions.
Dalmore Group has particularly excelled in Regulation A (Reg A) offerings, capturing nearly 50% of this market. The conversation delved into the challenges private issuers face in accessing capital and the innovative solutions Dalmore Group provides.
Challenges in Accessing Capital
Butler acknowledged the inherent difficulty in accessing capital, a challenge that has persisted over the years. However, he highlighted the emergence of various solutions and paths to capital as a result of the JOBS Act exemptions. These exemptions have opened the door for issuers to raise capital from virtually anyone over the age of 18, both domestically and internationally. This new approach allows issuers to take the process into their own hands, shifting away from traditional investment banking models and family and friends’ funding. With compliant marketing and promotion, issuers can now place an investment button directly on their websites and market their offerings similar to how e-commerce companies market their products.
The Role of Marketing and Technology
Effective marketing is crucial for the success of a crowdfunding campaign. Butler emphasized the need for issuers to produce a quality investment opportunity and to market it effectively. He pointed out that having a great opportunity is not enough if it cannot be effectively communicated to the right audience. This is where technology plays a vital role. Dalmore Group utilizes world-class technology to facilitate the investment process, making it as intuitive and seamless as possible. This includes tracking investor interest digitally and ensuring continuous engagement through social feeds and other digital platforms.
The technology used by Dalmore Group ensures that investors have a smooth experience, similar to what they encounter with platforms like Amazon Prime or Instacart. This involves creating a user-friendly interface that guides investors through the investment process, even when sensitive information is required. The goal is to reduce friction and make the process efficient while ensuring compliance with regulations.
Regulatory Challenges and Innovations
Navigating the regulatory landscape is a significant aspect of capital raising. Butler discussed the various regulations and exemptions that Dalmore Group deals with, such as Regulation D (Reg D), Regulation Crowdfunding (Reg CF), and Reg A. Each exemption comes with its own set of compliance requirements and challenges. For instance, Reg D involves filing the necessary forms and potentially working with a broker-dealer, while Reg CF introduces the need for accountant-reviewed or audited financials.
Reg A presents a unique set of challenges as it requires SEC qualification before an offering can go live. This process involves SEC review and potential back-and-forth communication, which can create uncertainties and delays. Butler stressed the importance of working with experienced securities counsel to navigate these complexities effectively. Experienced attorneys can proactively structure offerings, prepare responses to potential issues, and help issuers get through the qualification process smoothly.
Conclusion
Etan Butler provided valuable insights into the evolving landscape of capital raising through crowdfunding. Dalmore Group’s innovative approach leverages technology, effective marketing, and a deep understanding of regulatory requirements to help issuers successfully raise capital. As the crowdfunding market continues to grow, platforms like Dalmore Group play a crucial role in democratizing access to capital and supporting the growth of businesses. The conversation underscored the importance of adapting to new opportunities and challenges in the capital markets, making it clear that innovation can go a long way in addressing the regulatory complexity in this dynamic field.
Nick Morgan is President and Founder of ICAN, the Investor Choice Advocates Network, a nonprofit public interest litigation organization dedicated to serving as a legal advocate and voice for everyday investors and entrepreneurs. He was previously a partner in the Investigations and White Collar Defense Group at the law firm Paul Hastings. Morgan also previously served as Senior Trial Counsel in the SEC’s Division of Enforcement.
