On the working theory that more states are going to establish investment crowdfunding exemptions, I'm thinking it makes sense to start building a chart to compare them all.
What features would we want to track and compare?
Some categories are given:
- How much can an issuer raise in a 12 month period (it's interesting, isn't it, that almost all the crowdfunding exemptions seem to adopt a rolling, 12 month period measure for the cap on how much can be raised under the exemption);
- What's the per investor limit, and is it per deal or an aggregate annual limit (no standardization of measure here, and some exemptions get stuck in the glue of sliding scales);
- Is a funding portal, internet site or other intermediary required;
- Are the required intermediaries regulated; and
- What funding level triggers a reviewed or audited financial statements requirement.
Other aspects of the various exemptions will be more difficult to compare categorically.
For instance, what's the additional risk or exposure to directors, officer and promoters utilizing a given crowdfunding exemption, over, say, a comparable limited offering structure? One could almost imagine a numerical rating of risk, depending on a mix of factors such as:
- what kinds of disclosures are expressly required of a company raising funds under the exemption;
- what kinds of covenants must be made regarding use of proceeds;
- what new theories of liability, if any, are introduced under the exemption;
- what other unique requirements (separate from what is otherwise imposed under typical corporate law) are imposed on a company after closing on funds under the exemption; and
- what burdens or responsibility is placed on the investor risking a crowdfunding.
Please let me know what you think.
Photo: Grape City / Flickr.