Strategies

This resource page on community capital raising strategies outlines the key elements of the most common strategies, including their liquidity and ongoing compliance obligations. The information provided here should give you a sense of which strategies you might consider, but consulting a securities attorney will be necessary for confirming this decision and creating the offering.

Regulation Crowdfunding (Reg CF)

If your potential investor base is all over the US and you don’t need to raise more than $5 million in 12 months, Regulation Crowdfunding may be the simplest option, as the legal compliance costs are lower than other strategies. You have to use a licensed Reg CF portal, which will charge a success fee (in the form of a percentage of the amount you raise) and possibly other fees; so the total cost may be higher than other offering strategies. But in many cases, the portal helps with marketing and with some of the compliance details. Keep in mind, though, that while you can market the offering publicly, there are very strict rules about what you can say about the offering outside of your chosen portal.

The Broader Context

Many states have adopted their own crowdfunding laws. These laws are often very similar to the federal crowdfunding law (Reg CF) except that they are only available to investors in one state. In those states, there may not be much advantage to using the state crowdfunding law instead of Reg CF. But a few states have crowdfunding laws that are easier to use and may be more advantageous, even if they are geographically more limited. For example, some crowdfunding laws don’t require the use of a portal and are therefore more like a direct public offering, described next, but with a lower compliance cost. Other states may have higher offering limits without requiring audited financials.

Intrastate Direct Public Offerings

If your potential investor base is all or mostly in a single state and you want to have a direct relationship with your investors, an intrastate DPO may be the best option. In most states, there is no limit on how much you can raise, but you may need audited financials. This strategy involves registering the offering with your state regulators, so there is more legal work. However, since it doesn’t involve an intermediary (and no one will be taking a cut of what you raise), the total costs can be lower. That also means you’ll need to do your own marketing, or hire a marketing firm to help out, but you have much more latitude in how you can market the offering than you would with Reg CF.

Multistate Direct Public Offerings

This is like an intrastate DPO except that you can register your offering in multiple states and can take investment from investors in any of those states. Since you’ll be dealing with multiple states’ regulators, the legal costs will be a bit higher, and there will be a $10 million cap on the amount you can raise within 12 months.

Charity Direct Public Offerings

If your organization is a Section 501(c)(3) charity, there is a simple federal exemption that can make it easy to do a public offering. However, state laws vary widely. Most states also have an exemption for charities, but many of those require a regulatory filing before you begin the offering; some states don’t have an exemption for charities, which means that a charity would have to register with state regulators before it takes investment from those states.

Cooperative Direct Public Offerings

A few states have securities exemptions for offerings by some types of cooperatives. While these state laws vary considerably, they typically require that the coop be formed under the laws of that state, which, as a practical matter, means that only investors who reside in that state can invest.

Regulation A (Reg A)

This strategy is typically best for an organization that needs to raise between $5 million and $75 million from a potential investor base that is dispersed across the US. It requires audited financials, and it entails higher up-front legal costs, as well as higher ongoing compliance costs. (Hence, it is sometimes referred to as a “mini-IPO.”) It can be conducted as a direct public offering (that is, without any intermediary), or it can be handled through an online funding portal or through a securities broker-dealer firm that acts as an underwriter.