For smaller businesses, getting access to necessary financing can make or break them. Luckily, there is a new financing track available for business owners, providing more options to grow a new business.
Allow us to introduce you to a little-known intrastate exemption, known as Rule 147. Rule 147 can be used by a company to raise funds without actually registering with the SEC.
The company must be incorporated in the state in which it offers the securities, must carry on a significant portion of its business in that state (at least 80 percent of its operations), and investors must reside in the state of incorporation.
This intrastate exemption opens up the opportunity for everyone to invest in businesses within their state. As an investor, you do not have to be accredited.
At VENTURE.co, we have pioneered making Rule 147 accessible for online investment offerings of up to $2 million. Going online makes it even easier to introduce emerging companies to interested investors. More small businesses can discover funding within their own state, and more investors are eligible to participate.
You may have heard of the concept of locavesting: It’s the practice of connecting with investors locally to invest in their community. Our online application of Rule 147 breaks the rules of traditional financing because we can take locavesting to a new level.
Funding communities no longer need be defined by proximity. They can be reshaped into online communities encompassing an entire state. These investor communities are defined by passions and interests, not necessarily by neighborhood.
Online locavesting uses the power of the web and network effects of social media to drive investment in small business.
The investors are “out there,” and they are ready to invest. On the institutional side, let’s look at the activity among VCs. In 2015, venture capitalists pumped $58.8 billion into US businesses, according to the MoneyTree Report from PricewaterhouseCoopers and the National Venture Capital Association.
Looking at this from the perspective of the individual investor, we see enormous potential for growth, with access to a bigger pool of individual investors than ever before.
The Wall Street Journal reports that one in every 20 households in the U.S. has more than $1 million in investable assets, excluding the value of real estate holdings.
According to some estimates, only 3 percent of Americans qualify as accredited investors, however, so the rule changes soon to be applied as part of the JOBS (Jumpstart Our Business Startups) Act, and our online application of Rule 147, really open things up for small business.
This means that anyone can invest directly in the businesses they care about and potentially see returns. Businesses can connect with an investment audience, constrained by fewer limitations than before. They can get cash to grow their business, invest it in their business, and share in the profits of their business with their backers.
Venture.co has developed a transaction engine to efficiently and inexpensively launch an equity crowdfunding campaign meeting all compliance rules. Hence, it becomes economical for the entrepreneur to go after a crowdfunding equity raise when they’re doing it with these tools.
Kyle Clark is co-founder and head of product at VENTURE.co, a dynamic, creative and analytical engineer and inventor with a knack for tactical implementation and execution. Family, flying and fabricating bring him happiness. Aaron Pollak is co-founder and COO of VENTURE.co, Passionate about helping entrepreneurs who have developed new products and services find investors to help them launch and grow.