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On May 16, 2016 — Monday — securities-based crowdfunding goes live in the United States. This means that any American entrepreneur can go out and raise up to $1 million from friends, family, and social network for their startup or small business. However, this isn’t your typical rewards-based crowdfunding. Entrepreneurs (aka issuers as they are known in this new world of securities-based crowdfunding) are selling the “promise of a future return” in their business, and that makes this is a highly regulated activity.

Rather than talk about the benefits (access to capital, product/market validation, sales, jobs, etc.), we really need to be preparing entrepreneurs to understand the process, their role, how to execute a securities-based campaign, and how to stay compliant with the law.

If you are an entrepreneur and wondering what tasks you need to follow in order to solicit funds and be compliant, here is a start:

Step Description Example Products Est. Cost
1. Educate yourself Debt or equity crowdfunding is a highly regulated activity. You need to understand how to do it within the confines of the law. Take the time to learn so you don’t get into trouble. Crowdfund Investing for Dummies*, Success with Crowdfunding*, IAEOU, VentureHive $20 –  $298
2. Build your social network You can’t crowdfund without a crowd. Start collecting your crowd, building your social network, and blogging about your idea (but don’t blog about the details of your offering — you’ll learn why not in the education step). Facebook, Twitter, WordPress free – $35/mo
3. Create offering documents These include a business plan, financials, use of proceeds, description of the security being offered, valuation, and risks with the offering. liveplan,

idisclose, Stratifund, Equidam

$20/mo –  $10,000
4. Review CPA/audit, disclosure check, investor check Depending on how much money you seek to raise, you will need to have a CPA review of your financials and potentially an audit. You also might need to verify the accreditation of your investors. At a minimum, it behooves you to have a third-party check to make sure you have all the necessary documents completed for your offering. CrowdfundCPA, EarlyIQ, Accredify, Crowdcheck free – $12,000
5. Apply to get listed on a crowd-funding platform Most platforms do their own vetting of deals before they decide to list them. Find the platform that best matches your type of offering (debt vs. equity), the kinds of businesses they promote (tech, energy, etc), if they are a broker-dealer vs. a funding portal (BDs can do outreach to help you achieve your goal, but  they cost more). Example platforms include: Seedinvest, StartEngine, NorthCapital, Offerboard,, wealthforge, crudefunders, trucrowd, nextseed ~7% to ~ 12% of offering
6. Market your offering Keep in mind that with Regulation Crowdfunding all you can say is “I’m raising capital for my business click here” (to go to the funding platform where the listing is). However, it is pretty much your job to find your investors. This is where you put your campaign marketing plan into action. Crowdfunding CRM free – $35/mo
7. Keep yourself organized Once you raise funds you will have investors. You will need to know who they are, how to get in touch with them, what round they were part of, what percent of the company they own, etc. All this is stored in what is known as Cap Tables and files. KoreConx free – $150/mo
8. Communi-cate with your investors The law stipulates (among other things) that you must provide your investors with an annual update of your performance. Leverage tools that can help you extract key financial data from your Quickbooks so that you can create annual reports as well as file those with your investors, the funding portal, and the SEC. FivePlus Trax, AngelSpan ~$120/mo – ~$350/mo
9. Insure yourself Now that you’ve started and funded your endeavor, make sure your business and your investors have the right insurance to protect you/them in case anything goes wrong. variable
10. Become part of an association Stay on top of what is happening in the industry and with the regulations by being part of the associations that are focused on assisting you. CFIRA, CFPA $50 – $1,000/yr

Once done reviewing the task lists, you should be left scratching your head thinking, “This could end up costing me a lot of money.” That’s right. It costs money to raise money — in this case, anywhere from a few thousand dollars (not including the costs of producing a video for your campaign) plus the platform fees all the way up to $30,000 plus the platform fees. You will need to consider this when deciding how much money you need to raise.

However, most of the tech providers offer a suite of solutions depending on your needs. The greater the need, the more you will pay. Our advice to you is to spend adequate time learning not just about the platforms but also about all the other components you will need not just to launch your campaign but to be compliant with the law. Then decide which tech plugins you will use and what they will cost you. Keep in mind, you are fundraising. This is usually a continual activity. The earlier you train yourself on best practices and leverage the tools to assist in being successful, the more likely you are to be successful down the road.

*In full disclosure my firm authored/created these education materials

Sherwood Neiss is a partner at Crowdfund Capital Advisors. Neiss helped lead the U.S. fight to legalize debt and equity based crowdfunding, coauthored Crowdfund Investing for Dummies, and cofounded Crowdfund Capital Advisors, where he provides strategy and technology services to those seeking to benefit from crowdfund investing. Neiss and Jason Best are credited as the fathers of Title III of the JOBS Act. After attending the bill-signing ceremony at the White House, they formed Crowdfund Capital Advisors to study what is happening in crowdfunding, analyze results, report trends, and follow opportunities. They are active investors in the crowd finance space.