Crowdfunding: Is It Here to Stay?

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Table of Contents

  1. Crowdfunding Overview
  2. Crowdfunding Transactions in Carolinas & Georgia in 2019
  3. Private Placements in Carolinas & Georgia June – December 2019

The Jumpstart Our Business Startup (JOBS) Act, enacted in 2012, allowed startup companies and small businesses to offer and sell securities to the general public through crowdfunding. The Securities and Exchange Commission enables eligible companies to participate in crowdfunding under the following rules:

  • All transactions must take place online through an SEC-registered intermediary, either a broker-dealer or a funding portal.
  • Companies can raise a maximum total amount of $1,070,000 through crowdfunding offerings in a 12-month period.
  • Individual investors are limited by the amount they can invest across all crowdfunding offerings in a 12-month period depending on their annual income or net worth.
  • Disclosure of specified information is required in filings with the SEC, investors, and the intermediary facilitating the offering.

According to the SEC, crowdfunding investments can only occur via a broker-dealer or a funding portal. The Financial Industry Regulation Authority (FINRA) is a government-authorized non-profit organization authorized under Section 15A of the Exchange Act to oversee U.S. securities firms. Broker-dealers and funding portals are required to become members of a registered national securities association, and since FINRA is the only such association, all crowdfunding intermediaries are required to become FINRA members.

The SEC released their Regulation Crowdfunding Study in June 2019. It concluded that there were 45 funding portals and nine registered broker-dealers that participated in at least one crowdfunding offering (excluding withdrawn offerings). The majority of companies raising capital through crowdfunding between May 2016 and December 2018 were relatively small and early in their lifecycle. An estimated 1,351 offerings (excluding withdrawn filings) sought a median minimum target amount of $25,000 and the median maximum amount of $500,000. Most offerings were conducted through funding portals, suggesting market specialization, but this is partly due to the compliance and oversight costs faced by broker-dealers.

The Carolinas and Georgia saw seven transactions involving crowdfunding during 2019. Boon, Inc., a health care technology company in Durham, NC, raised $0.14 million through crowdfunding platform Wefunder Portal, LLC, a FINRA-registered portal. SimpleShowing Holdings, Inc., a real estate operating company located in Atlanta, GA, raised $1.07 million through OpenDeal Portal, LLC, another FINRA-registered portal. The Carolinas and Georgia’s transactions raised a total of $2.50 million with an average of $0.36 million per transaction through crowdfunding. All transactions that took place in the Carolinas and Georgia during 2019 occurred through FINRA registered funding portals.

Along with the SEC, FINRA helps to ensure crowdfunding intermediaries are compliant with FINRA rules and Regulation Crowdfunding. FINRA believes that funding portals are aware of their compliance obligations. Moreover, despite many of the intermediaries’ lack of prior experience being regulated, FINRA maintains its strict oversight, which puts investors at ease knowing FINRA is working on their side.

StartEngine, one of the largest crowdfunding portals, was approved as a broker-dealer in July 2019. StartEngine’s co-founder and CEO, Howard Marks, believes, “Equity crowdfunding is now a real alternative, and soon it will be mainstream. The future of finance is with the crowd.” Looking forward, one study expects the United States’ transaction value to increase by an annual growth rate of 5.4% between 2020-2023. This would result in a total amount of $915.2MM issued through crowdfunding by 2023. The SEC does not currently have any plans to update its Regulation Crowdfunding requirements.

With FINRA’s regulation over crowdfunding portals and broker dealers, we believe crowdfunding purposed for various end uses (new businesses fundraising, films, charitable causes) will continue to grow and evolve. The restrictions on amount of capital that can be raised in a 12-month period set to $1MM will restrict the growth in the total amount of capital raised through crowdfunding, especially since the longstanding, traditional private placement structures under Rule 506 of Reg D don’t place restrictions on the total amount of dollars raised.


Crowdfunding Transactions in Carolinas & Georgia in 2019

Private Placement Closed Date Target/Issuer Industry Classifications [Target/Issuer] Primary Address [Target/Issuer] Short Business Description [Target/Issuer] Total Transaction Value ($USDmm, Historical rate) Private Placement Features Round Type
10/31/2019 Boon Inc. Health Care Technology (Primary) Durham, North Carolina Boon Inc. operates an online platform that is specifically designed for healthcare industry to find and hire healthcare service professionals for their activities/needs. $0.14 Convertible Debt; Mezzanine Crowd-Funding
10/16/2019 SimpleShowing Holdings, Inc Real Estate (Primary) Atlanta, Georgia SimpleShowing Holdings, Inc. offers online real estate services in Florida, Georgia and Alabama. $1.07 Multiple Tranches Crowd-Funding
9/30/2019 Viral Films Media LLC Atlanta, Georgia Viral Films Media LLC is a new film company with the purpose of creating a single live-action superhero film, Rebel’s Run. $0.97 Minority Stake Investment Crowd-Funding
7/8/2019 Bublish, Inc. Application Software (Primary) Mount Pleasant, South Carolina Bublish, Inc. operates as a publishing technology company, provides cloud-based tools, metrics, and resources to equip business-savvy authors. $0.04 Minority Stake Investment; Multiple Tranches Crowd-Funding
7/3/2019 Franny’s Distribution Inc. Health Care (Primary) Asheville, North Carolina Franny’s Distribution Inc. manufactures and sells hemp products online in Canada. $0.11 Minority Stake Investment Crowd-Funding
2/12/2019 CFBB Pictures, LLC Communication Services (Primary) Greensboro, North Carolina CFBB Pictures, LLC engages in production of motion pictures. $0.02 Minority Stake Investment Crowd-Funding
2/1/2019 BandwagonFanClub, Inc. Communication Services (Primary) Simpsonville, South Carolina BandwagonFanClub, Inc. operates an online ticket marketplace and community for sports fans. $0.15 Minority Stake Investment Crowd-Funding

Source: S&P Capital IQ

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Private Placements in Carolinas & Georgia June – December 2019

Private Placement Closed Date Target/Issuer Industry Classifications [Target/Issuer] Target Location Business Description [Target/Issuer] Buyers/Investors Total Transaction Value ($MM) Use of Proceeds Private Placement Features
12/17/2019 2080 Media, Inc. Communication Services (Primary) Atlanta, GA 2080 Media, Inc., doing business as PlayOn! Sports, operates as a high school sports media company. BIP Capital, LLC; Teall Capital Partners, LLC $25.00 2080 Media, Inc. will use the proceeds to further its growth. Individual Investors Participated; Minority Stake Investment; Regulation D
12/11/2019 NN, Inc. (NasdaqGS:NNBR) Industrials (Primary) Charlotte, NC NN, Inc., a diversified industrial company, designs and manufactures high-precision components and assemblies in the United States and internationally. Legion Partners Asset Management, LLC; Corre Partners Management, LLC; Legion Partners, L.P. I $100.00 NN, Inc. will use the proceeds to repay all or a part of the outstanding debt. Convertible Equity; Minority Stake Investment; Warrants
12/10/2019 Passport Labs, Inc. Information Technology (Primary) Charlotte, NC Passport Labs, Inc. designs and develops a mobile payment platform. Rho Capital Partners, Inc.; H.I.G. Growth Partners, LLC; ThornTree Capital Partners $65.00   Minority Stake Investment; Multiple Tranches
12/3/2019 Motivo Consulting, Inc Health Care (Primary) Atlanta, GA Motivo Consulting, Inc, doing business as Motivo, designs and operates an online platform that connects mental health therapists to clinical supervisors. Cox Enterprises, Inc.; Techstars Central LLC; Great Oaks Venture Capital LLC; ECMC Holdings Corporation; The Jump Fund; Emmett Partners LLC; Next Wave Impact; SEI Ventures, Inc. $2.20 Motivo Consulting, Inc will use the proceeds to grow the company through employees and partnerships. Individual Investors Participated; Minority Stake Investment; Multiple Tranches; Regulation D
11/25/2019 BioIQ Inc. Health Care (Primary) Atlanta, GA BioIQ Inc., a healthcare technology company, develops technology solutions to connect individuals with health measurement opportunities. Research Triangle Institute; Arboretum Ventures LLC; Savitr Capital, LLC; HealthQuest Capital $14.00 BioIQ Inc. will use the proceeds to support its continued growth through expanding technology platforms. Minority Stake Investment; Regulation D
11/21/2019 BaseHQ, Inc. Information Technology (Primary) Greenville, SC BaseHQ, Inc. develops a software platform for executive assistants (EA) to manage all of their day-to-day responsibilities. Matchstick Ventures; High Alpha, Inc.; Rise of the Rest; Slack Technologies, Inc., Investment Arm $2.60 BaseHQ, Inc. will use the proceeds to grow its platform and add hires in sales, services, and engineering. Minority Stake Investment; Multiple Tranches; Regulation D
11/12/2019 Total Server Solutions L.L.C. Information Technology (Primary) Atlanta, GA Total Server Solutions L.L.C. provides managed servers, server management, data center space, and custom solutions. Layer 7 Capital LLC, Investment Arm $35.50 Total Server Solutions L.L.C. will use the proceeds to refinance the current credit facility and provide growth capital. Minority Stake Investment
11/5/2019 LeaseQuery, LLC Information Technology (Primary) Atlanta, GA LeaseQuery, LLC develops lease accounting software. Goldman Sachs Group, Merchant Banking Division $40.00 Minority Stake Investment
10/23/2019 Uwharrie Capital Corp (OTCPK:UWHR) Financials (Primary) Albemarle, NC Uwharrie Capital Corp provides commercial and consumer banking services to individuals and small to medium-sized businesses. $9.99 Regulation D
10/17/2019 Ekos Brewmaster, LLC Information Technology (Primary) Charlotte, NC ekos_brewmaster, LLC develops brewery management software for independent craft manufacturing businesses. Noro-Moseley Partners $8.00 Ekos will use the proceeds to enhance product features and build integration. Minority Stake Investment
10/16/2019 Streamline Health Solutions, Inc. (NasdaqCM:STRM) Health Care (Primary) Atlanta, GA Streamline Health Solutions, Inc. provides health information technology solutions and associated services for hospitals and health systems. $9.66 Streamline Health Solutions, Inc will use some proceeds to redeem its outstanding convertible preferred stock and the remaining proceeds for working capital. Individual Investors Participated; Management Participated; Minority Stake Investment; Regulation D
10/9/2019 Tandem Communications, Inc. Communication Services (Primary) Atlanta, GA Tandem Communications, Inc. provides marketing services. $8.68 Minority Stake Investment; Regulation D
9/30/2019 Southern First Bancshares, Inc. (NasdaqGM:SFST) Financials (Primary) Greenville, SC Southern First Bancshares, Inc. operates as the bank holding company for Southern First Bank that provides various banking products and services. $23.00 Southern First Bancshares, Inc. will use the proceeds for general corporate purposes, including providing capital to Southern First Bank and supporting organic growth.
9/30/2019 KIYATEC, LLC Health Care (Primary) Greenville, SC KIYATEC, LLC develops 3D cell-based assays for use in preclinical drug discovery and clinical therapy applications. Atlanta Technology Angels $10.00 Convertible Equity; Mezzanine; Minority Stake Investment
9/30/2019 Florence Healthcare, Inc. Health Care (Primary) Atlanta, GA Florence Healthcare, Inc. develops tools that enable the management and monitoring of clinical trial data flow. Atrium Health Foundation; Fulcrum Equity Partners, Inc.; Bee Partners $7.10 Florence Healthcare, Inc. will use the proceeds to broaden company’s product offerings. Minority Stake Investment; Regulation D
9/24/2019 Nview Health, Inc. Health Care (Primary) Atlanta, GA Nview Health, Inc. develops a cloud based behavioral health interview and screening platform. BIP Capital, LLC $4.65 Nview Health, Inc. will use the proceeds to fulfill its mission of bringing vital behavioral health innovation to the broader medical community. Convertible Equity; Mezzanine; Minority Stake Investment; Multiple Tranches
9/23/2019 Drum Technologies, Inc. Information Technology (Primary) Atlanta, GA Drum Technologies, Inc. develops and operates gig economy platform and mobile application to earn money by promoting businesses. Grotech Ventures; BlueRun Ventures; Felicis Ventures; BoxGroup; American Express Ventures; Wildcat Venture Partners, LP; Propel Venture Partners LLC $11.00 Drum Technologies, Inc. will use the proceeds to accelerate new product introduction and customer acquisition for businesses. Individual Investors Participated; Minority Stake Investment
9/16/2019 Mission Lane LLC Financials (Primary) Atlanta, GA Mission Lane LLC provides credit card services to subprime consumers. Oaktree Capital Management, L.P.; The Invus Group, LLC; QED Investors; LL FUNDS LLC $500.00 Mission Lane LLC will use the proceeds to scale the company. Minority Stake Investment
9/16/2019 Greenlight Financial Technology, Inc. Financials (Primary) Atlanta, GA Greenlight Financial Technology, Inc. provides debit card services for kids to help parents raise financially smart kids. TTV Capital; JPMorgan Chase & Co, Private Banking and Investment Banking Investments; Live Oak Banking Company; Wells Fargo & Company, Investment Arm; Relay Ventures; Drive Capital, LLC $54.00 Greenlight Financial Technology, Inc. will use the proceeds to fuel continued growth and accelerate its development roadmap. Foreign Investment; Minority Stake Investment; Multiple Tranches; Regulation D
9/12/2019 2ULaundry, Inc. Consumer Discretionary (Primary) Charlotte, NC 2ULaundry, Inc. provides garment care services primarily in Charlotte, North Carolina. Morgan Creek Capital Management, LLC; Endeavor Global, Inc., Investment Arm; Florida Funders, LLC; Engage Ventures, LLC $6.00 2ULaundry, Inc. will use the proceeds to expand to up to six more markets in the Southeast, access to a network of companies, and to build out its capabilities. Minority Stake Investment; Multiple Tranches
9/6/2019 Troy Health, Inc. Financials (Primary) Charlotte, NC Troy Health, Inc. provides health insurance. $5.38 Convertible Debt; Mezzanine; Minority Stake Investment; Multiple Tranches; Regulation D
9/3/2019 Saltbox, Inc. Real Estate (Primary) Atlanta, GA Saltbox, Inc. provides co-working and co-warehousing rental services. Kapor Capital; Arena Ventures; MetaProp NYC; Village Global $3.20 Saltbox, Inc. will use the proceeds to build co-working for entrepreneurs who need warehouse space and provide a community for the concrete class. Individual Investors Participated; Minority Stake Investment
8/28/2019 AnalyticsIQ Holdings, Inc. Communication Services (Primary) Atlanta, GA AnalyticsIQ Holdings, Inc. provides consumer data and analytics solutions. $15.00 Minority Stake Investment; Regulation D
8/27/2019 NextGen Capital, LLC Financials (Primary) Atlanta, GA NextGen Capital, LLC is an investment bank that provides financial advisory services. $2.60 Minority Stake Investment; Regulation D
8/21/2019 Kobiton, Inc. Information Technology (Primary) Atlanta, GA Kobiton, Inc. designs and develops a mobile testing platform. Kinetic Ventures, L.L.C.; BIP Capital, LLC; KMS Technology, Inc. $5.20 Kobiton, Inc. will use the proceeds to expand its sales, marketing, customer support, and product development efforts. Convertible Equity; Individual Investors Participated; Mezzanine; Minority Stake Investment; Regulation D
8/20/2019 Rainway, Inc. Information Technology (Primary) Atlanta, GA Rainway, Inc. develops an application for streaming games on any device. Madrona Venture Group, LLC; Bullpen Capital; GoAhead Ventures $3.50 Rainway, Inc. will use the proceeds for compensation, working capital and compensation. Individual Investors Participated; Minority Stake Investment; Regulation D
8/14/2019 Community First Bancorporation (OTCPK:CFOK) Financials (Primary) Walhalla, SC Community First Bancorporation provides commercial banking products and services to personal and business customers. $10.00 Minority Stake Investment; Multiple Tranches; Regulation D
8/6/2019 Stratifyd, Inc. Information Technology (Primary) Charlotte, NC Stratifyd, Inc., doing business as Taste Analytics LLC, develops a Software-as-a-Service data analysis and visualization platform. $10.00 Stratifyd, Inc. will use the proceeds to facilitate future growth, to hire top talent, to help expand our solution’s capabilities and attract new clients. Foreign Investment
7/30/2019 MyPorter, LLC Industrials (Primary) Atlanta, GA MyPorter, LLC provides full-service moving, packing, and storage services to families and students. $2.20 MyPorter will use the proceeds to drive accelerated market share gains in the Atlanta market and prepare for expansion into new markets in quarter 1 2020. Individual Investors Participated; Minority Stake Investment
7/16/2019 OneTrust, LLC Information Technology (Primary) Atlanta, GA OneTrust, LLC develops a Web-based enterprise software platform for data privacy compliance. Insight Venture Management, LLC $200.38 OneTrust, LLC will use the proceeds to grow and help organizations comply with data privacy laws and navigate online privacy rules. Minority Stake Investment; Multiple Tranches; Regulation D
7/5/2019 Flourish Software, Inc. Health Care (Primary) Atlanta, GA Flourish Software, Inc. develops a seed-to-sale tracking platform for cannabis cultivators and distributors. 7thirty Capital $2.10 Flourish Software, Inc. will use the proceeds to aggressively expand its sales and marketing efforts and accelerate product development. Minority Stake Investment; Regulation D
6/19/2019 Cousins Properties Incorporated (NYSE:CUZ) Real Estate (Primary) Atlanta, GA Cousins Properties is a fully integrated, self-administered and self-managed real estate investment trust (REIT). $650.00 Cousins Properties Incorporated will use the proceeds to repay outstanding loans under its existing senior unsecured revolving line of credit. Multiple Tranches
6/19/2019 Cypress.io, Inc. Information Technology (Primary) Atlanta, GA Cypress.io, Inc. develops a front end testing tool for developers and QA engineers to test software applications. Bessemer Venture Partners $9.27 Convertible Equity; Individual Investors Participated; Mezzanine; Minority Stake Investment; Regulation D
6/13/2019 Medxoom Inc. Information Technology (Primary) Atlanta, GA Medxoom Inc. develops white label member engagement platform and complete healthcare cost management solutions. TTV Capital; Las Olas Venture Capital; Lattice Ventures $3.35 Medxoom will use the proceeds to build healthcare marketplaces, to increase staff and platform expansion and to bring transparency to medical billing. Individual Investors Participated; Minority Stake Investment; Multiple Tranches
6/6/2019 Hart Dairy Creamery Land Waynesboro Inc. Consumer Staples (Primary) Augusta, GA Hart Dairy Creamery Land Waynesboro Inc. produces and sells free-range and grass-fed milk. Alium Capital Management Pty Ltd $10.00 Hart Dairy will use the proceeds to further expand their premium and better-for-you dairy product offerings. Foreign Investment; Minority Stake Investment
6/6/2019 ChartSpan Medical Technologies, Inc. Health Care (Primary) Greenville, SC ChartSpan Medical Technologies, Inc. develops and delivers an app that enables patients to organize, request, and send their family’s health records. C&B Capital, L.P.; Bailey Southwell & Co.; Blue Heron Capital, LLC; BIP Capital, LLC; Service Provider Capital, LLC $15.00 ChartSpan Medical Technologies, Inc. will use the proceeds to scale its operations nationally. Minority Stake Investment; Regulation D

Source: S&P Capital IQ

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