This is a great question!

You should expect to spend about 10 percent of the money you raise on the costs of the offering, excluding marketing. I'd caution against spending money on marketing but remember it will take a lot of work.

Some legal and accounting costs will have to be paid before you can begin raising money. That would typically be at least $5,000 and could easily total 3 to 5 percent of the offering, depending on your circumstances.

The portal will also charge fees. They vary in structure and size but expect to pay 5 percent or more.

Yes! Absolutely!

Many people believe, I say correctly, that one day soon, we'll use blockchain to record title to all manner of physical or tangible objects, from boats and cars to real estate. The immutable, public nature of blockchain would be perfect for this purpose.

The trick will be for the blockchain community to fully embrace the regulatory and governmental aspects of legal ownership of non-digital assets.

I love crowdfunding because it helps people who traditionally have had trouble accessing capital. Women and BIPOC founders now have a new path to funding. Small businesses that are integral parts of a community, like restaurants, can now raise money from their customers. Our country is richer because of crowdfunding and getting richer every day.

Jordan, this is a great question. Thanks for coming to the CfPA Ecosystem for insights.

Of course, there is no industry or sector that can be thought of as traditionally raising money via crowdfunding. The industry is too new, implemented just six years ago and really gaining scale only in the past two years. We're all learning.

There is no reason you can't crowdfund for a gold mining operation. Obviously, this is a great time to be investing in gold.

FINRA-registered portals are required to do some screening to prevent fraudsters from attempting to raise money on their platforms. Portals are allowed to do some additional screening to curate a theme. They are not allowed to imply that they have done thorough underwriting of an offering. Broker-Dealers, like Start Engine, that operate portals are allowed to do more and charge more than the other portals, including offering more help raising money.

Some platforms focus on serving small business, real estate, tech or other niches. While I haven't spotted a portal focused on extractive industries, one may exist. However, you can test out the large players (Wefunder, Republic and StartEngine) where you are most likely to find admission.

You want to remember that there is no magic crowd; the money you raise will come from your networks primarily.

Good luck!

It's not really a test that you pass or fail. The Howey test is just one of the tests used in securities law to determine whether an instrument being offered is a security or not. There are other tests that can also be used, such as the Reves test. Which should be applied depends, as the SEC says, on the facts and circumstances.

If an instrument meets the various elements of the Howey test, it will be treated as a security. I guess that might be said to be "failing" Howey.

I'm not a tax advisor, but you might want to look into Section 1244 losses and if you might qualify.

https://crowdwise.org/taxes/three-ways-the-us-gives-tax-relief-for-investing-in-startups/

At the very least, your losses should qualify as capital losses, similar to if you bought a stock and it went to zero. 

For the complete answer we drafted to answer this, please read our complete blog post on Traditional SAFE vs. Crowdfunding SAFE.

A brief summary of some of the key differences include:

1. Crowdfunding SAFEs may have optional conversions: in some crowdfunding SAFEs (such as Republic’s Crowd Safe), shares convert at the next equity financing round at the discretion of the issuer (i.e the startup). While most traditional SAFEs are forced to convert at the next qualified financing round, many crowdfunding SAFEs give the company the option to either convert to equity or defer conversion until a later time.

While this may sound like a bad thing for investors at first, there are situations when investors can actually benefit from this delayed conversion (e.g. they may actually experience less dilution due to follow-on raises than other equity investors).

2. Crowdfunding SAFEs may convert to Shadow Series shares: in the Republic Crowd Safe, the SAFE may convert to shadow shares, which means the same class of shares (e.g. Common vs. Preferred) as other investors, but with limited voting and information rights.

3. Crowdfunding SAFEs Investing via an SPV: When you invest in a SAFE on Wefunder, you’ll often be investing in a Special Purpose Vehicle (SPV). While this is typical for angel investors on sites like AngelList, this means you’ll actually be investing in the SPV (e.g. “Company X, a Series of Wefunder SPV LLC”), and not be directly investing in the company itself.

Investing in an SPV may have potential tax implications (because the SPV is an LLC). Furthermore, investing in an SPV may have implications in terms of the potential future liquidity of that investment due to complications when listing SPV shares on a secondary market.

4. Many Crowdfunding SAFEs are still Pre-Money: while the standard Y-Combinator SAFE was changed to convert based upon post-money valuation in 2018, many of the SAFEs used on crowdfunding sites today are still using pre-money valuation for the conversion price.

5. Some Crowdfunding SAFEs may have repurchase rights: something that most VCs and angel SAFEs would never have is a “repurchase rights” or “redemptive clause”. These terms allow the company to buyback SAFE investors at the company’s discretion, which typically happens if a later-stage VC wants to “clean up” the cap table (i.e. get more control and ownership for themselves) or when the company is doing well and wants to buy out early investors. It's my personal opinion that investors should typically avoid SAFEs with these terms. These terms put the company’s best interests at odds with that of the investors’.

The good news is that I personally have not seen any SAFEs recently with these repurchase terms (although I have seen some Common Stock offerings on some platforms with repurchase rights, so be careful!). It seems that crowdfunding portals have realized that these repurchase rights often end poorly for investors and are used by issuers who might not have their crowdfunding investors’ best interests at heart.