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Private Placements Blog


May 30, 2019

REG CF (Regulation CF)was created under Title III of the JOBS Act.

This exemption gives smaller companies the ability to raise up to $1 million via the internet. Issuers may solicit either accredited or non-accredited investors with some limits on the amount any individual may commit to a Regulation CF offer.

Broker-Dealers do not have to register as funding portals and many already qualify to sell these securities. Some platforms offer Reg CF securities as broker-dealers and are already FINRA approved. Most platforms are also offering securities under Reg A+ and Reg D, especially Rule 506(c, to boost deal flow and drive revenue.

NextSeed is a debt only platform providing issuers an alternative to banks and online lending platforms while allowing smaller investors the chance to generate income.

FINRA-approved Reg CF crowdfunding portals:




Indiegogo / MicroVentures (First Democracy VC)



Open Deal (Republic)



DreamFunded Marketplace

Funding Wonder Crowd


GrowthFountain Capital


JumpStart Micro

Kasdaq (Mr. Crowd)


NetCapital Funding Portal

Not So Small Change (Small Change)

Razitall TruCrowd

. . . . . .

uFundingPortal was removed from the list when questions came up regarding transparency and deal quality.

Investors are coming from all 50 states. Most issuing companies are located on the coasts. Most companies have listed valuations in the range of $5 to $6 million.

Although Indiegogo entered the sector only recently, two of their offers (2 out of 4), BeatStars and Republic Restoratives have already hit their funding goal.

Some platforms are focusing on specific industry categories like Small Change for Real Estate and IndieCrowdFunder for entertainment/film.

Seed Rounds and Crowdfunding 

May 30, 2019

Seed Rounds and Crowdfunding

Startups and fast-growing businesses are increasingly turning to Crowdfunding exemptions to raise capital in Seed Rounds and Pre-Seed Rounds. They are relying on JOBS Act exemptions from SEC registration, primarily Regulation D, to make equity and debt offerings to accredited investors and non-accredited investors. And they are quickly learning how to use other exemptions created by the JOBS Act, especially Regulation S and Registration A.

➢ Q: What is a Pre-seed Round?

A: This is when the issuer and other founders if any are getting the company’s operations off the ground. This is time for a Friends-and-Family Round. No debt. Almost all the investors in early stage companies demand and receive part ownership. It is too early for promissory notes, except for some well-secured real estate deals, unless the investor insists on preferred convertible notes. Valuation is the rub. Valuation is seldom transparent. It is subjective, based on management, track record, market size, competition, risk and any number of things.

➢ Q: What is a Seed Round? A: Sometimes called the Early-Stage Round, this is when issuers hire a founding team to do market research, ancillary product development and market testing. This is also when the issuer decides what the final product or service is going to be and what the ideal demographic is going to be.

➢ Q: Who are Seed Round investors?

A: Seed Round capital sources include angel investors, private equity investors, and alternative class investors. Some issuers return to friends, family and associates at this stage.

➢ Q: What are the Crowdfunding exemptions?

A: Regulation D, using either or both Rule 506(c and Rule 506(b], is the most popular exemption.

Regulation S, for offerings to non-U.S. citizens, is becoming more popular as issuers discover some advantages over Regulation D, such as little regulatory oversight (especially in Malta and other favored offshore jurisdictions), no maximum raise, and no PPM (private placement memorandum) required.

Regulation A has two versions, one with a $20 million max, and the other a $50 million max. Regulation A is the exemption most similar to full registration with the SEC; therefore, compared to the other exemptions, particularly Regulation S, it is prohibitively expensive and time-intensive.

Practice Tip: Well-advised issuers are increasingly using separate Regulation D and Regulation S websites, one for domestic marketing and one for foreign marketing, offering the same assets.

➢ Q: What is the difference between 506(c and 506(b?

A: Rule 506(c allows an issuer to market to the public; Rule 506(b does not. Rule 506(b allows up to 35 non-accredited investors; Rule 506(c does not. The usual drill is to use 506(b to raise money from friends, family and associates. After all capital requirements have not been met, the issuer converts the 506(b offering into a 506(c offering.

History Factoid: To market securities to strangers, as now allowed under Rule 506(c, was illegal for over 8 decades. Today, issuers using Rule 506(c can do practically anything to go after both accredited or non-accredited investors; for instance last year a REIT used 506(c to raise capital from early-stage investors on Craigslist.

➢ Q: So why do any issuers use 506(b?

A: Issuers continue to use Rule 506(b because it allows up to 35 non-accredited investors. If you need family money and some members of the family are not accredited, you must use 506(b.

Practice Tip: An issuer can go from 506(b to 506(c but not from 506(c to 506(b.

➢ Q: What are Series A, B and C Rounds?

A: These rounds are for issuers with track records who have established a user base, have consistent revenue figures or enjoy other proofs of process. Most Series A Rounds raise between $15 million to $50 million. Series B and Series C Rounds usually raise more capital than that, sometimes much more. These rounds are when series 7 and other securities licensees take interest and when VCs and PE (private equity) funds do much of their investing.

Sometimes a single large investor will serve as the “anchor” (think COSTCO as the first tenant in a shopping center), drawing in other, more risk-adverse investors, in exchange for re-negotiated terms.

Most issuers never need Series A funding, let alone Series B or C funding. Their Pre-Seed and Seed Rounds have raised enough capital to enable them to avoid giving more equity.


Private Placement Advisors LLC designs and executes Pre-Seed and Seed Rounds using Crowdfunding (JOBS Act) exemptions. This is all we do. Schedule a free 20-minute consultation. We will listen to the company’s narrative, we will ask questions, and we will suggest one or more JOBS Act solutions. For specific suggestions on how Private Placement Advisors LLC may be able to help your company raise Seed and Pre-Seed capital, email [email protected]

General partnership for a specific purpose

May 30, 2019

Some real estate developers and others are able to avoid possible securities challenges by using a general partnerships for a specific purpose.

A general partnership for a specific purpose vehicle may allow borrowers to find interim or medium term financing without reliance on exemptions from Federal and state registration requirements. This strategy requires a lender who is willing to assume joint liability for your acts and omissions in the execution of the general partnership’s business, but only for those acts and omissions.

Learn more about how to use unregistered non-exempt private placements for real estate projects at

Our Blog

An ongoing series of informational entries

Regulation S Restrictions Calibrated to the Level of Risk

Under Rule 903 additional restrictions are calibrated to the level of risk that the Regulation S securities will flow back into the United States.

Rule 903 sets forth three categories of transactions.

Transactions by Category Category 1 transactions include offerings of securities by foreign issuers or, in the case of non-convertible debt securities, a U.S. issuer, in an “overseas directed offering.” There is no Category 1 distribution compliance period during which time the securities may not be resold.

Category 2 transactions include offerings of equity securities of a reporting foreign issuer; debt securities of a reporting U.S. or foreign issuer; and debt securities of a non-reporting foreign issuer. The Category 2 safe harbor is available even if there is a substantial U.S. market interest in the securities. Exempt category 2 debt securities include non-participating preferred stock and asset-backed securities.

Category 3 applies to all transactions not eligible for the Category 1 or Category 2 safe harbors. Category 3 transactions include debt or equity offerings by non-reporting U.S. issuers; equity offerings by U.S. reporting issuers; and equity offerings by non-reporting foreign issuers for which there is a substantial U.S. market interest.


Canadian issuers of cannabis private equity seeking access to U.S. capital must satisfy Regulation S under the JOBS Act.

Regulation S provides a safe harbor for securities in offshore transactions with no directed selling efforts in the U.S. The term “directed selling efforts” means anything could have the effect of “conditioning” the U.S. market for the offering. Any press releases or other publicity surrounding the cannabis offering must not be disseminated in the U.S. There must be a prominent legend on the securities saying that the offering is not available to U.S. citizens. Typically, U.S. investors are sought in the same time period.

This “cross-border offering” is actually two separate offerings marketed in parallel on both sides of the border. The SEC exemptions that cannabis offerings usually rely on for the U.S. portion of their cross-border offerings are Rule 506(b and Rule 506(c under Regulation D. With Rule 506(c private cannabis shares can be offered to anyone anywhere in almost any manner. A virtual Wild West for early stage capital, in early 2018 a REIT used Rule 506(c to raise capital on Craigslist. Issuers can indiscriminately solicit investors online and elsewhere for any legal service or deliverable.

Rule 506(b, sometimes referred to as the “Friends and Family Exemption,” permits the issuer to sell shares to 35 non-accredited investors as well as to any number of accredited investors. The downside is that Rule 506(b cannot be used if the issuer wants to solicit the public. As for re-sales, Rule 144A provides an exemption for QIBs (Qualified Institutional Buyers), which include U.S. insurance companies, investment companies, certain employee benefit plans, trusts, broker-dealers, and large banks.

A cannabis private placement (as well as any private equity transaction) can be followed by a resale to a QIB. For example, a fully underwritten cannabis offering could be sold to a syndicate of initial purchasers who in turn can sell shares to one or more QIBs.

Questions? Contact [email protected]

Private Placements Review

Private Placements Review is a discussion of recent exempt offerings in cannabis, distressed real estate, Blockchain and other Reg D flavors of the month.

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