Regulation Crowdfunding for startups: a founder's guide

• Reg CF caps raises at $5 million in a 12-month period and must run through a registered broker-dealer or funding portal.
• Non-accredited investors face SEC limits based on income and net worth; accredited investors don't under Reg CF.
• Above $124,000, financial statements must be reviewed by an independent accountant; larger raises may need an audit.
• Crowdfunding succeeds when you already have a community that would buy your product.
• Ask about crowdfunding vehicles to keep the cap table clean for later investors.

What Regulation Crowdfunding is

Regulation Crowdfunding (often called Reg CF or equity crowdfunding) lets a company sell securities to the general public, including people who are not accredited investors, through an online platform. Before the JOBS Act, most startup fundraising was limited to accredited investors under Regulation D. Reg CF opened a regulated path to customers, fans and community members who want to own a piece of a company they believe in.

According to the SEC, the core rules are:

• All transactions must take place online through an SEC-registered intermediary, either a broker-dealer or a funding portal.
• A company can raise a maximum aggregate of $5 million through crowdfunding offerings in a 12-month period.
• Non-accredited investors are limited in how much they can invest across all crowdfunding offerings in a 12-month period.
• The company must file disclosures with the SEC and provide them to investors and the intermediary.

FINRA, which regulates funding portals, publishes a list of the portals it regulates. Check that list before signing with any platform.

When crowdfunding fits, and when it doesn't

Crowdfunding is also a marketing campaign. Successful raises usually come from a company's existing community, not from strangers browsing the platform. If you couldn't sell your product to the same people, you probably can't sell them shares.

Investment limits for non-accredited investors

The SEC's guidance for issuers sets the limits each non-accredited investor can put into all Reg CF offerings over 12 months:

• If either annual income or net worth is less than $124,000, the limit is the greater of $2,500 or 5% of the greater of annual income or net worth.
• If both annual income and net worth are $124,000 or more, the limit is 10% of the greater of the two.
• Across all Reg CF offerings in 12 months, a non-accredited investor's total may not exceed $124,000.

The SEC's own example: an investor with $30,000 of annual income and $105,000 net worth can invest up to $5,250 (5% of $105,000). Accredited investors are not subject to these limits under Reg CF. Spouses may calculate income and net worth jointly.

Financial statement requirements

How much financial review you need depends on the size of the offering. Per the SEC's issuer guidance:

Budget for the accountant's fee and time. A review or audit can take weeks, and you need clean books first.

How a Reg CF raise works, step by step

1. Clean up the company. Corporate records, cap table, contracts, bookkeeping. See cap table basics.
2. Test the waters (optional). SEC rules allow an issuer to solicit interest from the public before filing Form C, as long as materials state that no money is being solicited or accepted and that indications of interest carry no obligation. No money or commitments can be accepted until Form C is filed, and the materials must be included with the filing.
3. Choose an intermediary. Compare fees, investor audience, the security types they support and how they handle investor communications. Confirm registration on FINRA's list.
4. Prepare Form C. The offering statement is filed electronically on the SEC's EDGAR system and with the intermediary. It describes the business, the offering, risks, financials and use of proceeds.
5. Launch to your community. Email list first, then social, press and partners. Early momentum matters because later investors look at how much is already committed.
6. Close and comply. After the raise, keep up with ongoing reporting. The SEC notes that companies that failed to meet Reg CF annual reporting requirements in the prior two years can't use the exemption again.

What it does to your cap table

A crowdfunding round can add hundreds or thousands of investors. Many platforms offer a special-purpose crowdfunding vehicle so those investors appear as a single entity on your cap table; the SEC's rules address these vehicles, which file Form C jointly with the company. Ask about this structure early, because some later-stage investors are wary of a long, messy cap table.

Think too about the instrument. SAFEs, convertible notes, common stock and preferred stock all appear on Reg CF platforms. Choose terms you'd be comfortable showing a seed or Series A lead later (SAFE vs priced round).

Combining crowdfunding with angels and funds

Crowdfunding doesn't have to be the whole round. Many founders combine a Reg CF campaign with a parallel or earlier raise from angels and funds under Regulation D (rules on integrating offerings apply, so involve counsel). An anchor check from a known local angel or fund before launch also gives the crowd confidence. Build that part of the round the usual way: start from pre-seed investors in your state and sector, then use the warm intro playbook.

Reg CF readiness checklist

• A community you can reach directly: customers, email list, waitlist, social following.
• Clean books and a budget for a reviewed or audited financial statement.
• A securities lawyer who has handled Reg CF before.
• An intermediary confirmed on FINRA's funding portal list (or a registered broker-dealer).
• Terms you'd be comfortable showing a later venture investor.
• An anchor commitment, if possible, before launch.