Regulation Crowdfunding: The Paradigm Shift
As of March 2021, private independent businesses can raise up to $5 million directly from investors over the internet through SEC approved websites.
Regulation Crowdfunding is a Game Changer for Private Business
Private businesses seeking investor capital can now go directly to the public over the internet, through SEC approved websites and raise as much as $5 million dollars in a 12-month period from both accredited and non-accredited investors. They can even advertise to the general public their investment offering. This is a massive change to laws established during the Great Depression, 1933 and 1934, empowering both investors and businesses alike.
Hundreds of Millions of Dollars Raised a Year
In the first half of 2025 small private businesses all across America raised $200 million dollars through Regulation Crowdfunding (Reg. CF), that is a 12% increase over the prior year.
Maintaining Integrity
This new opportunity is not without regulations, established in 2021, it is highly regulated, as it should be, it is important that these new regulations establish and maintain the highest standards of integrity.
Regulation Crowdfunding is one of three exemptions created by the JOBS Act of 2012* to the 1933 Securities Act and the 1934 Securities Exchange Act. Though past in 2012, effective regulations were not put into place until March 2021.
Stocks and Bonds
These new regulations put small businesses on a similar level as publicly traded companies, they can issue any type of security including stocks and bonds. Generally, issuing of stock is something where the business and investors expects rapid growth in value and has an objective of being acquired or going public to create liquidity for the investors. Most businesses don’t fit this category; most private companies are not looking to be sold they are intended to produce an income for the owners and often times the owners plan or dream of passing the business on to the next generation.
What’s Next
This is the first of a series of articles created to guide business owners and investors of all levels on the new regulations. Over the next few months, we’ll delve into details of how businesses are using the new investment rules to take control of their business financing needs, now and into the years ahead. Conversely, we will also discuss how investors, of all levels, accredited and non-accredited, are able to participate in private equity financing and explore case studies and strategies to position your business to maximize your potential for success.
In Short
Private small business can now include capital formation as part of the overall business marketing and Public Relations strategy.
Turn your network of customers, prospects and service providers into your private “growth capital bank”.
This strategy does not eliminate your need for commercial banks, instead it takes them out of the driver’s seat, puts them in the back seat, puts the business owner in the driver’s seat.
FIRST STEP - How to prepare for your Regulation Crowdfunding Campaign
The best thing a business owner can do if they think that they may someday hold a crowdfunding campaign the best thing is to focus on building connections with their clients and prospects.
Customer Relationship Manager systems and Email Newsletters
Build up your contact information and “permissions” agreements for email or texting. You don’t have to necessarily send newsletters, though for many businesses periotic contact with your approved list of recipients is a good strategy. For the Crowdfunding campaign you want the approvals in place so as you pursue the opportunity of an investment round through crowdfunding you are in a position to let your contacts know.
NOTE: The JOBS Act of 2012 created three exemptions of note to the 1933 and 1934 Securities laws. Regulation Crowdfunding, which is what I focus on here, was established under Title 3 of the Act, Regulation D, Section 506(c) was established under Title 2 of the Act and Reg A+ was established under Title 4 of the Act. I will in the future cover details each of these exemptions.
THIS IS NOT LEGAL ADVICE, THIS INFORMATION IS FOR EDUCATIONAL PURPOSES ONLY. INVESTING IN PRIVATE EQUITY IS EXTREAMLY RISKY, SEEK ADVICE FROM COMPETENT COUNCIL BEFORE INVESTING OR INITIATING A REGULATION CROWDFUNDING CAMPAIGN