Pre-IPO Profits

Pay Attention to Reg CF Deals

Pay Attention to Reg CF Deals
By Adam Sharp
Date January 26, 2021

On March 15th, the fundraising limit on Regulation Crowdfunding (Reg CF) campaigns will go from $1.07 million to $5 million. Startups that raise capital using Reg CF are the deals that non-accredited investors can access.

With the $1 million limit, Reg CF just wasn’t worth it for many promising startups. The rewards didn’t justify the efforts. But once the new $5 million limit goes live, I fully expect to see many serious startups utilizing this option. Raising $5 million from 10,000 or more investors can be a powerful catalyst for the right company. Consumer startups in particular could dramatically benefit from having 10k investors. Those investors can become an army of promoters. And $5 million is a good-sized round — that’s enough to fully fund a Series A round of funding.

Of course, accredited deals on sites like AngelList will still be much higher quality on average. I will continue to make most of my investments on accredited sites. But I’m pretty sure there are going to be some very high quality opportunities coming up in Reg CF moving forward. And those companies will also be forced to disclose their financials, which we don’t usually get access to in accredited deals.

The minimums on Reg CF deals are typically much lower than deals for accredited investors only — often just $100 or $500. So if you’re looking to get in more “deal reps,” Reg CF is increasingly a good place to look. Keep an eye on the deals that are out there. And if you see something promising, you can invest small amounts so that you keep tabs on the opportunity. It’s a valuable learning opportunity — and it could be quite lucrative as well.

Here are a few Reg CF sites to get you started. Remember, the new $5 million limit goes into effect March 15th, so until then it will be mostly early-stage opportunities.

Our friends at KingsCrowd also do a great job of tracking all of the CF deals out there and rating them based on factors like valuation, team composition, and more.

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