To become a crowdfunding funding portal under the JOBS Act, an entity must register with the Securities and Exchange Commission (SEC) as a "funding portal" and comply with certain regulatory requirements. Here are some of the key requirements:

1: Registration: The entity must register with the SEC as a funding portal by filing Form Funding Portal and must become a member of a national securities association (currently FINRA - the only game in town). Form Funding Portal requires information from the funding portal applicant, including information about the funding portal's business, principals, control relationships, and employees. See: https://www.sec.gov/tm/divisionsmarketregtmcompliancefpregistrationguidehtm

2: Restrictions on Activities: Funding portals are limited in the types of activities they can engage in. For example, they are prohibited from offering investment advice, soliciting transactions, or handling investor funds or securities. They may provide limited communication channels for issuers to communicate with potential investors, but all communication must be conducted through the portal and must be accessible to all investors. IMHO, some restrictions may be tighter than they should be given the capabilities of harnessing the crowd with technology.

3: Investor Protection: Funding portals must take steps to protect investors, including verifying the identity of each investor and limiting the amount of money each investor can invest in a given offering. They must also provide investors with educational materials and warnings about the risks of investing in crowdfunding offerings. It's important to remind investors at every turn that investing is risky - and they can lose all of their investment. Unlike the world of crypto where FOMO is the key selling point, this is REGULATED INVESTMENT CROWDFUNDING so education, disclosures, and caution is warranted.  

4: Disclosure Requirements: Funding portals must provide certain disclosures to investors, including information about the issuer, the terms of the offering, and the risks involved in investing in the offering. They must also provide ongoing updates about the issuer and the offering. When in doubt, build disclosures throughout your platform's workflow.

5: Record keeping and Reporting: Funding portals must maintain records of all transactions conducted through the portal and provide certain reports to the SEC.

Compliance with these requirements is essential for a crowdfunding funding portal to operate legally under the JOBS Act. It is important to note that these requirements may be subject to change as the SEC continues to learn from the experience of industry stakeholders and develop its regulatory framework for crowdfunding offerings.

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Unless the portal is a licensed broker-dealer, it may not offer investment advice or recommendations or solicit purchases, sales, or offers to buy the securities offered or displayed on its platform.

It may however apply objective criteria to highlight offerings on its platform where: 

(i) The criteria are reasonably designed to highlight a broad selection of issuers offering securities through the funding portal’s platform, are applied consistently to all issuers and offerings and are clearly displayed on the funding portal’s platform; 

(ii) The criteria may include, among other things, the type of securities being offered (for example, common stock, preferred stock or debt securities); the geographic location of the issuer; the industry or business segment of the issuer; the number or amount of investment commitments made, progress in meeting the issuer’s target offering amount or, if applicable, the maximum offering amount; and the minimum or maximum investment amount; provided that the funding portal may not highlight an issuer or offering based on the advisability of investing in the issuer or its offering; and 

(iii) The funding portal does not receive special or additional compensations for highlighting one or more issuers or offerings on its platform.

Regulated investment crowdfunding, also known as equity crowdfunding, is the process of raising money from a large number of investors, often through online platforms, in exchange for equity in a company. While it can be an attractive way for startups and small businesses to access capital, there are several reasons why it can be difficult to navigate the regulatory environment surrounding investment crowdfunding.

1. Regulatory compliance: Investment crowdfunding is regulated by securities laws, which can be complex and vary by jurisdiction. Platforms that facilitate investment crowdfunding must comply with these laws, which can be difficult to navigate without legal expertise.

2. Investor protection: Securities laws are designed to protect investors from fraudulent or misleading investments. As a result, investment crowdfunding platforms must take measures to ensure that investors are adequately informed about the risks associated with the investment, and that they meet certain criteria for investing, such as income or net worth thresholds.

3. Capital raising limitations: Investment crowdfunding is subject to limitations on the amount of capital that can be raised from individual investors, as well as the total amount that can be raised through crowdfunding in a given period. These limitations can make it difficult for companies to raise the capital they need through investment crowdfunding alone.

4. Competition with other fundraising methods: Investment crowdfunding is not the only way for companies to raise capital. Other methods, such as traditional bank loans, venture capital, or angel investing, may be more attractive to some companies depending on their stage of growth, industry, or funding needs.

Overall, regulated investment crowdfunding can be a complex and challenging process due to regulatory compliance, investor protection requirements, capital raising limitations, and competition with other fundraising methods. However, it can also provide an opportunity for companies to access capital from a large pool of investors and reach a wider audience than traditional fundraising methods.

Great question! While we feel like we are about to enter into a heightened regulatory environment (due to FTX and similar), blockchain, crypto, NFTs and CBDCs will definitely innovate the space. Possibly not quite in 2023, but soon.

Because securities have heavy regulatory oversight (and that oversight has country borders) our prediction is that the focus will be on CBDCs (Central Bank Digital Currencies) as they act as a country's 'digital currency'. As more and more Equity Crowdfunding deals look to have global investors, these could play a key role.

What are CBDCs?

Central Bank Digital Currencies (CBDCs) are digital tokens, similar to cryptocurrencies that are essentially the digital equivalent of the country’s currency. Over 100 countries are currently experimenting with CBDCs, and some have even implemented them.

Essentially, CBDCs can play a key role in draining unnecessary intermediaries from the existing financial system into the digital realm. Besides reducing economic friction by reducing counterparties needed in payments, trade, and banking, the technology can slash financial services costs for consumers and enterprises alike by facilitating trusted, direct connectivity between transacting parties. 

There is less risk when compared to NFTs or crypto, where almost anyone with a computer can build a 'coin' and add it to a wallet.

In the United States, companies looking to raise funds through crowdfunding must comply with the rules and regulations set forth by the Securities and Exchange Commission (SEC) in Regulation Crowdfunding. Some of the requirements for companies include:

- The company must be organized in and have its principal place of business in the United States.
- The company must provide certain disclosures to the SEC and to potential investors, including financial statements and information about the management team and the business.
- The company may only raise a certain amount of money in a 12-month period, currently $5 million
- The company must use an SEC-registered intermediary, such as a broker-dealer or a funding portal, to conduct the crowdfunding offering.
- The company must also provide certain investor protection measures, such as allowing investors to cancel their investment commitments within a certain period of time.
- The company must also make sure that their campaign adheres to anti-fraud regulations and that their investors are accredited or not.

It is important to note that these requirements and rules are subject to change and depending on the legislation of different countries the requirements may vary.

It is difficult to predict exactly how regulated investment crowdfunding will evolve in 2023, as it depends on a variety of factors such as changes in the regulatory environment, technological developments, and market trends. However, here are a few potential developments that could shape the future of regulated investment crowdfunding:

1. Increased use of blockchain technology: Blockchain technology could potentially be used to streamline the crowdfunding process, making it faster and more secure.

2. Development of new regulatory frameworks: Governments around the world may develop new regulatory frameworks to address the unique challenges and opportunities presented by crowdfunding.

3. Growing popularity of alternative forms of financing: Crowdfunding may become more popular as an alternative to traditional forms of financing, such as bank loans or venture capital.

4. Increased competition: As crowdfunding becomes more popular, more platforms may enter the market, leading to increased competition among platforms.

5. Greater focus on investor protection: As the industry evolves, there may be a greater focus on protecting the interests of investors, including through the use of measures such as disclosure requirements and investor education.

Overall, it is likely that regulated investment crowdfunding will continue to grow and evolve in the coming years, with a focus on using technology to improve the efficiency and effectiveness of the process. 

*Written by OpenAI's ChatGPT* 

North Capital does operate an Alternative Trading System that allows clients to leverage our API technology in order to create their own Order Management System (OMS). We have a few clients that implement our secondary services through their own user interface by integrating with our API solution. You can always reach out to a North Capital representative in order to discuss in more detail.

The Financial Industry Regulatory Authority (FINRA) is responsible for regulating the securities industry and overseeing broker-dealers in the United States. Part of this responsibility includes granting licenses to firms that want to operate as crowdfunding portals under Regulation Crowdfunding (Reg CF), which is a set of rules issued by the U.S. Securities and Exchange Commission (SEC) that allows small businesses to raise capital from a large number of investors through the internet. Because Reg CF is a federal regulation, it is up to FINRA to ensure that firms seeking to operate as crowdfunding portals meet the necessary requirements and are in compliance with the rules set forth by the SEC.

*Written by OpenAI's ChatGPT* 

This is a great question! @Brian Belley recently told me that the average investment via Reg CF is about $750. That suggests there is some room to budget for marketing. On the other hand, investors plopping down $100 leave very little room. I hear ranges of from 10 to 30% for marketing budgets. Using 20% against the average of $750 would suggest the cost of investor acquisition is $150--far more than a common $100 minimum investment. I hope Brian or others can add more color to this conversation.

Thanks!

Yes, you can solicit as to what terms people might find attractive, including valuation. I would generally include a disclaimer of some kind saying that just because something has been suggested it doesn't mean that will be reflected in the deal terms if you eventually make an offering.

Sara