It wasn’t until 2015 when small businesses were able to use crowdfunding means to fund their projects. Only the wealthiest in America, or accredited investors were allowed to enter this investment pool. Following the Jumpstart Our Business Startups (JOBS) Act, entrepreneurs of all industries and all statuses were able to access investment capital and raise up to a million dollars per year from the public. Small business finally had the chance to dive into a huge investment pool…
The Reg A+ and Reg CF Policies
Long gone are the days when millions in assets or a six-figure income was needed to invest in a business. There are now new policies that enable small investors to invest in startups and small projects, irrespective of the size of their portfolio or capital. Reg A+ and Reg CF of the JOBS act assist businessmen in raising capital from investors with less affluence. This differs extremely to other policies (Title II) which require investors to have a net worth of at least a million dollars. The only factors that play a role are:
- Investor limits
- Raised amount
- Filing requirements
Also referred to as “Title III”, Reg CF opens doors to startups whose prime focus are cannabis-related projects. Crowdfunding portals now give startups in the U.S. or Canada the opportunity to raise up to $1,070,000.
The SEC has also laid down rules for non-accredited investors to invest in Regulation Crowdfunding. Nevertheless, the amount they are eligible to offer is restrained by factors such as their annual income and total net worth. The requirements are as follows:
- With an annual income of minimum $107,000, you can invest up to 10% of your net worth or income.
- With an annual income of under $107,000, you can invest up to 5% of your net worth or $2,200.
- The maximum amount that an investor can invest in one year is $107,000.
Reg A+, known as “Title IV” gives private businesses the opportunity to raise up to $50 million from accredited and non-accredited investors. This scheme offers investors the chance to engage in faster and more affordable capital funding. To meet the requirements, companies (U.S. and Canada) must require a minimum of $2,000,000. It is also required to:
- Have SEC qualification
- Have growing accounting & legal costs
- Have continuous disclosure requirements
There are two tiers for fundraising when it comes to the Reg A+ scheme:
Tier 1 – the company can raise up to $20 million from accredited investors without limits.
Tier 2 – the company can raise up to $50 million from both accredited and non-accredited investors, whilst preventing state blue laws.
Like cryptocurrencies, you need to build investor interest for cannabis-based projects. There needs to be a strong initial investor community. StartEngine is a prime example of a platform that has a huge investor base. Additional platforms include the likes of Fundanna, Cannafundr and 420FundMe. Each of these great platforms allow businesses to crowdfund their cannabis projects.
- Fundanna – a Reg CF crowdfunding platform, specialising in the marijuana field and regulated by FINRA.
- Cannafundr – accepts investments that are a minimum of $2500.
- 420FundMe – crowdfunding platform which also offers networking and launch parties.
As for now, when the financial markets soar from new raising cannabis projects, investing in cannabis seems to be the new trend. Some times it comes as crowdfunding project and for others it fits in the traditional investment – stocks and shares.
Cannabis stocks are on the rise and many investors keep their eyes on it. Aurora, Abbvie, Altria and many other names keep jumping on the news as the new stars to replace the cryptocurrencies.