One thing I will never get tired of working in this space is the variety of companies that have been able to effectively utilize offerings under Regulation CF and Regulation A. These exemptions are versatile, and allow for companies to raise funds whether they have no interest in being more than a neighborhood restaurant, or dream of growing into an exchange listed multinational company. The commonality is that these companies believe they will have the most success with an appeal directly to retail investors, some of whom may be friends, family, and fans.
One notable example at the higher end of using Regulation A is Newsmax. Newsmax went out to its viewers and gave them the opportunity to become investors. This fit perfectly with Regulation A, and as a result, Newsmax was able to raise $75 million ahead of listing on the New York Stock Exchange. This type of Reg A IPO has some challenges that differ from an underwritten IPO in which there are fewer holders of record to manage. However, this was an easy tradeoff to make for Newsmax when turning its viewers into stakeholders.
Marketing to fans also works at the smaller level. Recent changes at the SBA mean that certain lending criteria is more difficult, which will be more impactful on entrepreneurs without their own sources of capital, and those founded by minority entrepreneurs and women. Reg CF is able to bridge that financing gap, and has been used successfully by minority led companies, especially those operating brick-and-mortar food and beverage businesses. And while women-led companies still tend to raise less under Reg CF, there are notable exceptions to that as well, and greater funding as an overall percentage than what is encountered in angel and VC funding.
On the subject of angel and VC funding, it does not have to be an either/or situation with crowdfunding. We see companies that have taken institutional funding then utilize the crowd as a component of a future financing round, as well as companies that structure their offerings to ensure that there is no issue if a future institutional or strategic investor wants to come in.
All of this is to say, there can be value in going with the crowd. It works for companies that are small and intend to stay small, as well as for companies that are on a path of growth. It also works to support capital needs when other sources may be more limiting. There is no guarantee companies will be able to raise money, and many do not, but if successful, there can be value beyond just the dollars raised.