The greatest ideas mean little until they become a reality. The process of turning your idea into a viable business takes commitment, know-how, and of course, capital.

Fortunately for businesses today, there are many options for raising capital. New crowdfunding technologies combined with the recent passing and implementation of the JOBS Act, have unlocked tremendous new avenues to raise money for your business.

In the last few years, business funding conversations have fundamentally changed. More and more companies are now considering equity crowdfunding as a way to fuel their business in addition to more commonly known options such as Debt, Angel, or VC funding.

A Few Big Moments for the JOBS Act

For the last 80 years, investing in startups has been limited to less than 4% of the US population. Reg A+ & Reg CF open up equity crowdfunding to accredited AND nonaccredited investors, providing the remaining 96% the opportunity to invest in your company.

Why Equity Crowdfunding Makes Sense

First and foremost, equity crowdfunding is much more than raising capital - it embodies the spirit of building a great company together with your fans and customers. Crowdfunding inherently provides a powerful marketing, engagement, and fundraising tool.

With Equity Crowdfunding, you can:

1. Set Your Own Terms: You determine your company valuation, how many shares to issue, and the minimum investment amount.
   
   
2. Retain Company Control: You don’t have to provide preferred stock or board seats.
   
   
3. Access A Larger Pool of Investors: Both accredited and non-accredited investors now have the chance to invest in your company. You’ll have a real chance to grow even without a handful of wealthy backers on hand. 
4. Create Brand Ambassadors: Customers can become part-owners, increasing their commitment and affinity for your company’s success. Investing provides them a reason to become evangelists for your company and you’ll have the ability to activate them as needed.
   
   
5. Increase Brand Equity: This modern approach to funding a company offers much more than traditional methods possibly can such as increased visibility and brand equity through the marketing efforts of your campaign. This, in turn, gets people talking about your products and services.
   
   
6. Attract Additional Sources of Funding: Crowdfunding and other sources of funding are not mutually exclusive. You can pave the way for future funding by leveraging a successful campaign and making your company more attractive to big investors.  

Types of Securities Offered

The most common forms of securities an issuer can offer are equity or debt. Examples of securities are as follows:

Common Stock: Conveys a portion of the ownership interest in the company to the holder of the security. Stockholders are usually entitled to receive dividends when and if declared, vote on corporate matters, and receive information about the company, including financial statements.

Preferred Stock: Stock that has priority over common stock as to dividend payments and/or the distribution of the assets of the company. Preferred stock can have the characteristics of either common stock or debt securities.

Debt / Revenue Share: Securities in which the seller must repay the investor’s original investment amount at maturity plus interest.

Convertible Note: This form of investment is popular with technology startups because it allows investors to initially lend money to the company and later receive shares if new professional investors decide to invest.

Learn more about how to choose the terms of your offering HERE.

Submission and Your Form C Filing

Prior to launching a Title III equity crowdfunding campaign, the issuer is required to complete and submit a Form C to the SEC together with required attachments. StartEngine has made it easy for you to do this by building it into our different onboarding fields. By completing the different fields in onboarding, you are not only building your campaign page that the investors will see, but you are crafting your Form C which will turn into the document filed with the SEC.

Companies that file a Form C are required to disclose certain information to the public which can be used to understand an investment and that helps determine whether a particular investment is appropriate for a specific person. This includes general information about the issuer, its officers and directors, a description of the business, the planned use for the money raised from the offering, often called the use of proceeds, the target offering amount, the deadline for the offering, related-party transactions, and risks specific to the issuer.

Required Disclosures

The required type of financial disclosure depends on how much an issuer has already raised within a year, and how much they intend to raise next.

$124,000 or less: If current offer plus previous raises amounts to $124,000 or less, the issuer provides information from the its tax returns (but not the tax returns themselves) certified by the principal executive officer. If financial statements are available they must be provided, too, and again certified by the principal executive officer. $124,000.01 to $618,000: If the current offering plus previous raises is between

$124,000.01 to $618,000: If the current offering plus previous Small OPO raises is between $124,000.01 and up to $618,000, financial statements reviewed by an independent CPA are required. If audited financial statements are available, they must be provided as well. The review must be for the shorter of the two most recently completed fiscal years or the period since your company's inception.

$618,000.01 up to $1,235,000: If the current offer plus previous Small OPO raises amounts to $618,000.01 or more, then the required financial statements must be reviewed by a CPA if they have not previously sold securities under Regulation Crowdfunding. If the company has previously sold securities, they must have their financials audited.

$1,235,000.01 up to $5,000,000: If the current offer plus previous Small OPO raises amounts to $1,235,000.01 or more, then the required financial statements must be audited by a CPA.

Note: An audit provides a level of scrutiny by the accountant that is higher than a review. 

The required information is filed with the SEC and posted at the start of the offering on StartEngine Capital and available to the public throughout the offering on the StartEngine Capital and SEC sites. It is available to the general public on both websites throughout the offering period – which must be a minimum of 21 days.

Fees

It is hard for startups and small companies to pay the expensive fees sometimes required to raise capital Equity crowdfunding makes it possible to raise money with very little out-of-pocket costs. Check out this article to learn how!