What 3 New SEC Rules Mean for Investors and Businesses in the Online Private Markets

The online private markets have become a disruptive tool for companies of all sizes seeking funding. In 2016 the JOBS Act empowered private companies to raise capital online through Regulation Crowdfunding (Reg CF), sometimes called equity crowdfunding. Four years later, companies with successful Reg CF raises have collectively pumped $1B into local economies (Crowdfund Insider). 


The SEC recently acknowledged the exciting growth of the industry and announced a few key rule changes. Here, we break down three of the biggest changes and what they mean for both investors and businesses.

Learn more about the online private markets at Netcapital.com

Money growing

Change #1: Raise Cap Increased From $1.7M to $5M per Year

 

For BusinessesSkyscrapers and a plane below a clear sky

If you're part of the leadership team of a business this is an upside for you. Previously, Reg CF, the most accessible option for private equity offerings online, had a raise cap of $1.7 million. An increased cap of $5 million for Reg CF raises allows your business to easily: 

  • Raise more capital 
  • Attract more investors 
  • Leverage the online private markets for later stage raises

WATCH: Our interview with Rob Burnett, Head of Business Development for Netcapital.com, to learn more about raising capital through the online private markets

For Investors

As an investor, this change means a more diverse set of investment opportunities. Thanks to the increased raise cap, more companies may be able to use Reg CF as a viable alternative to traditional fundraising methods. This includes bigger and later stage companies.

 

Change #2: Investment Limit Changes for Accredited Investors & Non-Accredited Investors

Accredited investor definition

For Investors

The new SEC rules make it easier for investors like yourself to invest more in exciting companies. Accredited investors, which are investors making more than $200,000 annually or have a net worth of at least $1 million, no longer have an investment limit. For non-accredited investors, you can now use the greater of your income or net worth, instead of the lesser when it comes to determining your investment limit.

For Businesses

One of the biggest benefits of the online private market is that you’re able to expand your potential investors: from institutional investors to your next door neighbor, anyone can invest in your online offering. The SEC’s changes to investment limits will allow you to raise more from people genuinely excited about funding your idea.

Team work meeting

Change #3: Covid-19 Protocols Extended

 

For Businesses 

The pandemic has affected businesses of all sizes. If you’re a small business hit especially hard, for the next 18 months you may be eligible to raise up to $250,000 using the lowest bar of financial reporting. This means that, with no extra burden, you can remotely raise emergency funds online through the online private markets at a time when your business needs it the most. 

Interested in learning more about what Netcapital Advisors can do to help your business raise capital? Contact us today

For Investors 

There’s more than one way to support a small business. Investing in a small business creates a new way to stay involved in a company, product, or service you believe in. The SEC’s extended Covid-19 protocols mean that more innovative ideas have a chance to succeed and that you have the chance to get in on the ground floor.

Yes we're open business sign

 

With these new SEC rule changes, the online private markets have incredible potential to help more entrepreneurs thrive and give more everyday investors a chance to invest in early-stage startups. Be sure to follow our blog for updates and more information on how you can make the most of this opportunity.

Paige Robinson

Paige Robinson · Author

Paige is the Content Marketing Associate at Netcapital Advisors. She is a graduate of Wellesley College, with a double major in American Studies and East Asian Languages and Cultures. Outside of her work at ValueSetters, Paige pursues creative writing and keeps up with the latest cultural news.

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