Title III Crowdfunding, also known as Regulation Crowdfunding or Reg CF, is a provision under the Jumpstart Our Business Startups (JOBS) Act that allows small businesses and startups to raise capital from a large number of individual investors through online crowdfunding platforms. This provision went into effect in May 2016 and was designed to make it easier for early-stage companies to access funding from a broader pool of investors.

Key features of Title III Crowdfunding include:

1. Investor Limits: Both accredited and non-accredited investors can participate, with certain limitations on how much they can invest. The investment limits are based on the individual's income and net worth.

2. Maximum Raise: Companies can raise up to a maximum of $5 million in a 12-month period through Title III Crowdfunding.

3. Online Platforms: Companies seeking funds under Reg CF must use online crowdfunding platforms registered with the U.S. Securities and Exchange Commission (SEC). These platforms facilitate the offering and provide a space for companies to present their investment opportunity to potential investors.

4. Disclosure and Reporting: Companies are required to provide certain disclosures to investors, including details about their business, financials, and use of funds. Ongoing reporting obligations are also imposed on companies to keep investors informed about their progress.

5. Intermediaries: Intermediaries, which are the online crowdfunding platforms, play a crucial role in facilitating the offering and ensuring compliance with regulatory requirements. They perform due diligence on the companies, provide educational materials to investors, and help manage the investment process.

6. Investor Protections: Title III Crowdfunding includes provisions to help protect investors, such as a requirement for background checks on company principals and a limitation on how much an individual investor can invest based on their financial circumstances.

Title III Crowdfunding aimed to democratize investment opportunities by allowing everyday individuals to invest in early-stage companies, which was previously limited to accredited investors. It offers potential benefits to both entrepreneurs and investors. However, it's important to note that investing in startups and early-stage companies carries inherent risks, as many of these businesses may fail to achieve their goals.

Before participating in any investment through Title III Crowdfunding, individuals should thoroughly research the companies and understand the risks involved. Consulting with financial advisors or legal professionals is also advisable to make informed investment decisions.

The SEC has been relatively lenient with crowdfunding issuers (as opposed to crowdfunding intermediaries), possibly so as not to stifle this emerging industry, so as yet there is not really a "most common" way to get in trouble.

They have brought a series of actions against companies raising under Regulation A for failures to comply with the very technical requirements relating to how Reg A offerings are modified, extended or expanded. They have also brought actions against Reg A issuers for misleading statements.

However, I am not aware of Reg CF issuers getting into the same sort of trouble, even though I have seen significant violations of the various ways they can get into trouble (companies not eligible to use Reg CF, companies failing to extend or expand offerings in compliance with Reg CF, companies making misleading statements, companies violating the Reg CF communications rules). I have heard anecdotally of the SEC warning issuers that they should get advice from a securities lawyer, though.

The statement that "investment crowdfunding is for companies who can't raise elsewhere" is largely inaccurate. In fact, investment crowdfunding has become an increasingly popular alternative financing solution for businesses of all sizes and stages of development. Many startups with solid business plans are now turning to online investor platforms as a viable way to save costs, attract more investors that can become customers ("investomers"), and build recognition in the marketplace.

It's true that investment crowdfunding can provide vital capital investments for companies with limited resources or access to banks or venture capitalists and it's also a viable way for established businesses to bypass traditional methods and raise funds with greater speed and efficiency.

For brands that rely heavily on their fans for success or for loyal customers to make repeat purchases, I predict that within 20 years, investment crowdfunding will become THE key competitive lever to building customer loyalty.   

The U.S. Securities and Exchange Commission (SEC) provides guidance and instructions for preparing Form C for Regulation Crowdfunding (Reg CF) offerings. Form C is the disclosure document that must be filed with the SEC and provided to potential investors in a Reg CF crowdfunding campaign.

The SEC's official website is the primary source for the most up-to-date information and guidance on preparing Form C and complying with Reg CF requirements. The guidance typically includes information on the following aspects:

1. Form C Content: The SEC provides detailed instructions on what information needs to be included in Form C. This includes information about the company, its management, its financial condition, the terms of the offering, and other relevant details.

2. Financial Statements: The guidance outlines the financial statement requirements for the offering. Depending on the amount being raised, companies might need to provide financial statements reviewed or audited by an independent accountant.

3. Risk Factors: Companies are required to disclose the risks associated with their business and the investment. The SEC guidance may provide recommendations on how to identify and present these risks.

4. Business Description: Form C should include a description of the company's business operations, products, services, and any other relevant information to help potential investors understand the nature of the business.

5. Use of Proceeds: The company needs to explain how it intends to use the funds raised through the crowdfunding campaign.

6. Target Offering Amount and Deadline: Information about the minimum and maximum amount the company is looking to raise, as well as the deadline for the campaign.

7. Compensation to Intermediaries: If the company is using a crowdfunding platform or intermediary to facilitate the offering, it should disclose the compensation arrangements.

8. Information about Directors and Officers: Details about the company's directors, officers, and owners, including their backgrounds and involvement in other businesses.

9. Ownership and Capital Structure: Information about the company's ownership structure, including the types of securities being offered and the rights associated with them.

10. Ongoing Reporting: Companies are required to provide updates to investors and the SEC after the offering is completed. The guidance may provide information on these ongoing reporting obligations.

It's important to note that the SEC's guidance may evolve over time, and it's essential to refer to the latest resources available on the SEC's official website or consult legal and financial professionals who specialize in securities regulations for the most current and accurate information.

If you define "success" as the amount of capital raised, one can find the complete list of Reg CF raises and sort by "Amount Raised" on the KingsCrowd advanced company search table here:

https://kingscrowd.com/companies/search/?reg_type=RegCF

Since the amendments to Reg CF in March 2021, issuers can now raise up to $5 million dollars in a 12 month period.

As of July 30, 2023, 41 companies have raise the maximum $5 million under Regulation Crowdfunding (Reg CF), and an impressive 384 companies have raised between $1 million and $5 million, which includes all the raises that hit the $1.07 million maximum prior to March 2021. 

In terms of companies that raised $5 million dollars, some of the ones that sold out their rounds and raised the $5 million the quickest (sometimes within a matter or hours or just a few days) are:

-Replit on Wefunder (April 2022)

-Substack on Wefunder (April 2023)

-Sound of Freedom on Angel Funding (June 2023)

-Mercury on Wefunder (October 2021)

-April on Wefunder (April 2022)

-Cultos on Republic (April 2022)

-Gumroad on Republic (March 2021)

There are a number of other raises that may have sold out their rounds in a matter of hours, but then took a longer time to close their rounds. All of this data can be determined from the KingsCrowd dataset by looking at the start/close dates and the average amount raised per day.

As far as I know Wefunder does do this, but this would be a great question to ask Wefunder.  I know many offerings on Wefunder that have been channeled through a series LLC without the issuer's or the investors' knowledge.  Also, every crowdfunding lawyer I have spoken to believes that Wefunder's use of the series LLC is not legal so issuers and investors need to be very careful.

One of the biggest challenges for issuers seeking to raise money using investment crowdfunding is the need to stand out in a crowded marketplace. Investment crowdfunding platforms have gained popularity in recent years, leading to increased competition among issuers seeking funding.

Here are some specific challenges they may face:

1. Market Saturation: With numerous projects and campaigns vying for attention on crowdfunding platforms, it can be difficult for issuers to capture the interest of potential investors. Standing out from the crowd and effectively communicating the value proposition of their project becomes crucial.

2. Investor Education: Investment crowdfunding often involves offering securities or equity in a business, which may require potential investors to have a certain level of financial literacy. Issuers need to educate and inform investors about the risks and potential returns associated with their offering, as well as the legal and regulatory implications.

3. Building Trust and Credibility: Since investment crowdfunding involves soliciting funds from the general public, issuers must work to establish trust and credibility with potential investors. This can be challenging, especially for new or unknown businesses. Providing transparent and comprehensive information about the project, including financials and business plans, is essential.

4. Compliance with Regulations: Issuers seeking to raise money through investment crowdfunding must adhere to regulatory requirements, which can vary across jurisdictions. Navigating these regulations and ensuring compliance can be complex and time-consuming. Failing to comply with the applicable rules can lead to legal issues and regulatory penalties.

5. Post-Funding Obligations: After a successful crowdfunding campaign, issuers have ongoing responsibilities to their investors. This includes providing regular updates, financial reporting, and potentially managing a large investor base. Meeting these obligations and maintaining investor relations can be demanding for issuers, especially if they have limited resources or experience in investor management.

Addressing these challenges requires careful planning, a compelling value proposition, effective marketing and communication strategies, and a solid understanding of the legal and regulatory landscape. Issuers should also consider leveraging their existing networks, engaging with the crowdfunding community, and seeking professional guidance to increase their chances of success.

In the context of regulated investment crowdfunding, "testing the waters" refers to the practice of gauging investor interest and soliciting indications of interest for a potential securities offering before formally launching the offering. This practice is permitted under certain regulations, such as Title II of the JOBS Act in the United States.

The pros of testing the waters in regulated investment crowdfunding include:

1. Market Validation: Testing the waters allows companies to assess market demand and investor interest in their offering before committing significant resources to a full campaign. It helps validate the viability of the investment opportunity and reduce the risk of launching a campaign that may not attract sufficient investor participation.

2. Feedback and Refinement: By engaging with potential investors during the testing the waters phase, companies can gather feedback and insights that can be used to refine their offering. This feedback can help identify areas for improvement, address investor concerns, and fine-tune the investment proposition.

3. Building Investor Relationships: Testing the waters provides an opportunity to establish relationships with potential investors early on. By interacting with them, sharing information, and answering questions, companies can build rapport, trust, and a sense of community around their offering. This can be beneficial when the formal campaign is launched, as these relationships can potentially lead to investment commitments.

4. Marketing Advantage: Engaging in testing the waters activities can help generate buzz and create awareness about the upcoming investment opportunity. It allows companies to start building a following, generating interest, and capturing potential investor leads, which can be leveraged during the formal campaign.

However, there are also potential cons to consider:

1. Legal and Regulatory Compliance: While testing the waters allows companies to solicit indications of interest, they must ensure compliance with relevant securities laws and regulations. There are restrictions on what can be communicated, limitations on the solicitation methods, and requirements to avoid actual investment acceptance until the formal campaign is launched. Companies need to carefully navigate the legal requirements to avoid any compliance issues.

2. Resource Intensity: Testing the waters can require significant time, effort, and resources. Companies need to develop marketing materials, engage with potential investors, respond to inquiries, and track indications of interest. This can create additional workload and costs, particularly for small businesses or startups with limited resources.

3. Potential Lack of Conversion: While testing the waters can provide an indication of investor interest, it does not guarantee that those who express interest will actually convert into investors during the formal campaign. There is a risk that the initial interest does not translate into actual investment commitments, which may impact the success of the crowdfunding campaign.

Overall, testing the waters in regulated investment crowdfunding offers several potential benefits in terms of market validation, feedback, relationship building, and marketing advantage. However, it also presents challenges related to legal compliance, resource allocation, and the uncertainty of converting indications of interest into actual investments.