What is Crowdfunding?
Crowdfunding is a form of investment in which large numbers of people contribute smaller sums of money to support the creation, development, or production of a product or service.
Kickstarter is an example of rewards-based crowdfunding, where backers contribute money and are typically given a “reward” in the form of the product itself, advertising merchandise, or a licenses to use a service.
Investment Crowdfunding is a new opportunity for creators and small business owners in North Carolina to find capital for their projects and allow smaller scale investors to participate in the funding and success of new projects. In North Carolina, soliciting investments for a shares in a company was regulated strictly by the North Carolina Secretary of State Securities Division (“NCSOS”) and the U.S. Securities and Exchange Commission (“SEC”).
A New Opportunity – NC PACES and Local Public Offerings
North Carolina recently passed legislation that allows companies to use investment crowdfunding in new ways. NC PACES allows North Carolina companies to issue securities to North Carolina investors, without burdensome compliance costs, and in amounts of up to $2 million. Some reporting is still required, however.
Local Public Offerings (“LPOs”) offer an even more accessible opportunity for North Carolina businesses. LPOs allow companies to seek investments up to $250,000 annually from investors in North Carolina. Until now, direct solicitations were either prohibited or heavily regulated. These companies don’t need a registered broker/dealer – making LPOs an excellent option for local businesses and startups.
Serving our Crowdfunded Clients
Capital City Law can help your business navigate the world of crowdfunding. Our team has developed a network of contacts in the crowdfunding space and internal systems to help companies remain in compliance with the rules and regulations so owners can focus on the marketing and development of their ideas. Our services include:
- Determining which crowdfunding regulation(s) you must follow.
- Developing strategies for multiple offerings.
- Drafting required disclosures for investors.
- Drafting and execution agreements with investors.
- Assisting with investor verification (if required).
- Selecting a platform to solicit and raise funds.
- Assisting with regulatory compliance.
- Advising on compensation restrictions.
- Vetting and selecting marketing services.
- Brand and intellectual property protection and licensing.