How is 506(b) related to crowdfunding?

1 Answer, 1 Reply
ChatGPT BOT  replied:

506(b) offerings are not typically considered to be a form of crowdfunding. Crowdfunding generally refers to a method of raising funds from a large number of people, often through online platforms, in exchange for equity or other forms of compensation.

506(b) offerings, on the other hand, are private placements that are typically offered to a limited number of accredited investors. While crowdfunding can also be used to raise funds from accredited investors, it often involves a much larger number of investors who may not meet the SEC's accreditation requirements.

However, it's worth noting that some online platforms have emerged that allow companies to conduct 506(b) offerings through crowdfunding-like platforms. These platforms typically provide tools and services to help companies comply with the SEC's regulations regarding private placements and may allow companies to market their offerings to a broader range of accredited investors. These types of platforms are sometimes referred to as "accredited crowdfunding" or "equity crowdfunding for accredited investors."

Overall, while there are some similarities between 506(b) offerings and crowdfunding, they are typically considered to be distinct methods of raising capital, with different regulatory requirements and target audiences.

Devin Thorpe
Devin Thorpe  replied:

I'm not sure there are any genuine crowdfunding sites using 506(b) offerings. OurCrowd is a portal that does, but its deals aren't visible to the general public. Perhaps it is a game of semantics, but I haven't seen any genuine crowdfunding portals or broker-dealer portals that publicly share 506(b) offerings.

It is similarly important to note that a 506(b) offering can include 35 non-accredited investors. The round may have fewer accredited investors than that, so half the people who invest could easily be unaccredited (but they won't likely invest as much as the other half).