Here is an overview of the different types of crowdfunding. Each has its own strengths. Depending on which stage your business is, you may want to choose one of the following options to raise funds.
*If you end up raising more than $5M in your Reg CF raise, we’ll spin up a concurrent Regulation D, Rule 506(c) offering so you can raise an unlimited amount from accredited investors.
**Rich means accredited investors with $1M+ in net worth (minus their home) or who’ve earned more than $200K per year ($300k with a spouse) in each of the past two years. It also means institutions like banks and VCs. Technically, 35 non-rich unaccredited investors are allowed.
***There is a variant of Regulation D (Rule 506c) that permits advertising if investors are verified as accredited. We support 506c raises when the issuer makes a Regulation Crowdfunding offering.
Reg CF is a law that rolled out in 2016 and received a considerable boost in 2021! Businesses can raise capital from their friends and local communities instead of just banks or venture capitalists.
Regulation D, Rule 506c helps you raise more than $5M (if you hit the Regulation Crowdfunding maximum) by moving over accredited investors into a concurrent offering.
Anyone can invest as little as $100 in your company. You can also advertise your fundraising to your customer list, in the press, or on social media (abiding by these rules). Reg CF is possibly the best way to maximize the amount invested (for most companies) while allowing customers and friends the opportunity to support you.
Your entire raise will be consolidated into SPVs – one if you don’t use Early Bird terms, or two if you do. Each will take up only one line on your cap table! This makes later rounds of raising a breeze while giving investors the same economic exposure and info as if they had invested directly in the company. A win-win.
You’ll be able to launch a pitch & start spreading the word in minutes! Supporters can begin reserving spots in your round immediately. These reservations are non-binding – no money has been sent to you yet. Once we help you finish your legal work, investors may be prompted to confirm their investments and potentially fund an army of supporters.
A ‘Form C’ must be filed with the SEC for you to collect the money you raise. You’ll need to disclose up to two years of GAAP financials, along with other items, like the number of employees, officers & directors, stakeholders with more than 20% voting power, past fundraising rounds, use of funds, all material risks. We can guide you through this in one phone call and generate it for you.
If you have already received money from an angel investor or venture capital firm, you likely have already done a Reg D fundraise.
This is the easiest, oldest, and most-used fundraising exemption. There are no public disclosure or ongoing reporting requirements other than a notification called a Form D. There is also no limit to the amount you can raise.
Only accredited investors — i.e., elite upper class investors — can invest in your company.
How Caravan Funds uses Reg D:
To help you raise more than $5M per year. If your company exceeds the maximum permitted to raise under Reg CF, we will move your accredited investors to a Reg D, 506(c) round and verify their accredited status. This allows more room to accept unaccredited investors in your Reg CF offering. We do this for free.
To help investors invest directly onto your cap table. With your permission, an accredited investor can invest directly onto your cap table (and vote for their shares). For this, we recommend a minimum $25,000 investment.
Regulation A+ is a new fundraising exemption that became active in late 2015, designed for later-stage companies who want to raise more funds publicly but don’t want to do a full-blown IPO yet. It’s like a “mini-IPO”.
You can raise up to $75M per year from anyone.
Before you can start fundraising and collect funds, you need to pre-file an offering placement memorandum (OPM) with the SEC. An OPM is like a business plan wrapped with many legal disclaimers and can cost up to $50,000 in legal fees. For this reason, early-stage companies should not use Reg A+.
Even if you think you could raise over $5M, it’s often best to begin with Regulation CF. We can get you started raising money months before your Reg A+ campaign will be ready. Plus, if you first raise $5 million or more on Caravan Funds in a Regulation CF with a Reg D campaign, we’ll waive our fees if you make a Reg A+ offering later.
Looking to Raise Capital?
If you are looking to raise capital through Caravan Funds, you can learn about our process here. Ready to start your adventure? Please contact our origination team at firstname.lastname@example.org to discuss the process and options, or apply here.