By now, hopefully you know that the goal of Metro Startup Launcher is to make it much easier for startup companies in the Louisville metro area to raise capital through equity crowdfunding. We also want to help lots of people in the Louisville area actually make money by investing small mounts in lots of startups: a strategy that statistically has proven to provide an average of 27% return on investment for angel investors in the United States.

Now that we have the monthly meetings rolling for both entrepreneurs and investors, I guess it should come as no surprise to anyone that startup entrepreneurs are starting to ask: OK, so how do I actually do equity crowdfunding for my company.

A lot of people around here still think that you start a business in your garage, you get in pitch contests, go to a bunch of networking meetings, and meet some rich guys who invest in your company.  Next thing you know, you’ve got venture capital money, a super cool startup company office, and all your wildest dreams come true!

The problem is, around here, we have plenty of pitch contests, but not enough rich people to invest in startups. However, we do have 1.3 million people in the Louisville metro area, and equity crowdfunding is now legal.

We've all heard about crowdfunding, but how does it work? Let's talk about some of the specifics.

On October 30, 2015, the Securities and Exchange Commission voted to adopt “Regulation Crowdfunding” (Regulation CF). The rules went into effect May 16, 2016. Regulation CF allows a company to sell up to $1 million in company stock in any 12-month period.

Here are a couple of the amazing features about the Regulation CF exemption:

It allows anyone to invest in a company. The investors do not have to be "Accredited Investors" (a.k.a millionaires).

You can raise capital from an unlimited number of investors, and the number of investors do not count toward the current maximum number of investors allowed by a private company (2000 total, 500 non-accredited).

However, investments are limited in the following ways:

If either the annual income or the net worth of the investor is less than $100,000, the investor is limited to invest the greater of $2,000 or 5% of the lesser of his or her annual income or net worth.

If the annual income and net worth of the investor are both greater than $100,000, the investor is limited to 10% of the lesser of his or her annual income or net worth, to a maximum of $100,000.

The transaction must be made through a broker, or through a “funding portal.” This is actually a good thing because the portals have made it pretty easy to run your fundraise.

The business must be incorporated in the U.S.

The business may not be an “investment” company (set up for the purpose of investing in another company).

The SEC requires that issuers provide certain information to investors through the intermediaries’ platforms and to the SEC directly via a filing of Form C on EDGAR, the SEC’s data handling system.

If a current offering plus previous raises amounts to $100,000 or less, the financial statements must be certified by the principal executive officer and accompanied by information from the company’s tax returns (but not the tax returns themselves).

If current offer plus previous raises amounts to $100,000-500,000, the financial statements must be reviewed by a CPA.

If the current offer plus previous raises amounts to $500,000 or more, the financial statements must be audited by a CPA. However,