Crowdfunding 2.0 May Attract Larger, More Profitable Companies

In April 2012, President Barack Obama signed the JOBS Act (Jumpstart Our Business Startups), also known as “the crowdfunding bill,” into law. The JOBS Act aimed to lessen regulatory burdens on small businesses and legalized equity crowdfunding, including removing the ban on a general solicitation that prevented entrepreneurs from publicizing that they were raising money. In practical terms, the JOBS act allowed businesses and investors to connect earlier in the development cycle enabling private investors to gain benefits previously reserved only for wealthy investors and Venture Capitalists (“VCs”). The initial bill imposed a maximum of $1,070,000 on the amount raised. Indiegogo and Kickstarter developed as two of the most popular crowdfunding platforms where entrepreneurs, startups and people with creative projects could raise capital to fund development. This appealed to a particular sector of business development but left out a lot of larger, more profitable quality businesses with larger capital needs.

Crowdfunding 2.0 – building on the initial success of Crowdfunding and to expand the addressable market that can benefit from this relatively new method of raising capital, on November 2, 2020, the Securities and Exchange Commissions (“SEC”) announced new rules for equity Crowdfunding. Those new rules went into effect on March 15th, 2021.

Key Takeaways:

• Regulation Crowdfunding annual limits increased from ~$1 million to $5 million
• Some other improvements made it easier to raise via equity crowdfunding

Crowdfunding Market to Grow by USD 196.36 Billion during 2021-2025

https://www.prnewswire.com/news-releases/crowdfunding-market-to-grow-by-usd-196-36-billion-during-2021-2025--13-86-year-over-year-growth-in-2021--technavio-301249041.html 

With these new rules in place, will equity crowdfunding finally live up to its promise of disrupting early-stage financing? With the higher limit of $5,000,000, some companies like ACFN Franchised Inc. (“ACFN”) took note and are taking action.

Crowdfunding platform Republic is one of the largest and most successful SEC-approved platforms facilitating Crowdfunding offerings with more than $1 Billion raised. ACFN decided to conduct its Crowdfunding campaign on Republic “They seemed very organized and had a corporate approach to the process that was a good fit for ACFN,” said Jeffrey D. Kerr, Founder and CEO of ACFN. “They have a due diligence process that both limits and qualifies the offerings on their platform resulting in higher quality offerings for their community of investors,” said Mr. Kerr. With audited financials reflecting revenue of $12,225,000 and a net profit of $613,000 in 2021, ACFN is a larger, more profitable company compared to the typical company raising capital with Crowdfunding. 

“We had no interest in Crowdfunding when the limit was only $1,070,000. There are simpler and quicker ways to raise capital at that rate as we did when we raised $2.25 million to help fund acquisitions in 2018 and then again in 2020,” said Jeffrey D. Kerr, Founder and CEO of ACFN. “When the limit was increased to $5 million, that was a game changer for ACFN and other companies like us,” said Mr. Kerr, that expects other larger, more profitable companies to enter the space as platforms and other support systems and services continue to develop.

Of the 102 live opportunities listed on Republic, as of November 21st, 2022 ACFN is the largest company by annual revenue and the only company with annual revenue above $10 million with ACFN revenue in the most recent 12 months reaching $14.5 million. 

“We are Crowdfunding to raise capital for current and specific acquisitions opportunities that will grow revenue substantially and profits exponentially,” said Jeffrey D. Kerr Founder and CEO of ACFN. “Crowdfunding is a great way for good companies with real growth opportunities to connect with investors directly, creating the opportunity for greater returns,” said Mr. Kerr.

Both Founders and Investors are embracing Crowdfunding and billions of dollars have already been raised through SEC approval and regulated portals. Crowdfunding is connecting investors and companies directly and earlier in the growth cycle, creating mutually beneficial opportunities.

Learn more about ACFN and other Crowdfunding opportunities on Republic  

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